A cap-and-trade policy is most often used to solve problems associated with:

Question

Quizplus · Accepted Answer

A cap-and-trade policy is designed to address the problem of negative externalities, which occur when the production of a good or service imposes costs on third parties who are not directly involved in the transaction. By capping the total amount of pollution or other negative externality that can be produced, and allowing firms to trade permits to produce that externality, a cap-and-trade policy creates incentives for firms to reduce their own polluting activities while still achieving overall reductions in pollution.

A Cap-And-Trade Policy Is Most Often Used to Solve Problems