In markets where external costs exist,efficiency cannot be enhanced by the creation of marketable pollution permits.

Question

Quizplus · Accepted Answer

Marketable pollution permits, also known as cap-and-trade systems, have been implemented as a way to internalize external costs and create incentives for firms to reduce pollution. By setting a cap on overall pollution emissions and allowing firms to trade permits, the market can incentivize emission reductions where they are most cost-effective. Therefore, the creation of marketable pollution permits can enhance efficiency in markets with external costs.

In Markets Where External Costs Exist,efficiency Cannot Be Enhanced by the Creation