Like negative externalities,tradable permits are useful in allocating common resources because:
A) the depletion of common resources imposes a negative externality.
B) the problem present in both is overconsumption.
C) the socially optimal quantity is not the same as the individual consumers in either case.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

All of the given statements are true. Tradable permits and negative externalities are both economic issues that result from the misuse of common resources, leading to overconsumption and depletion that negatively affects society as a whole. Tradable permits correct this issue by allowing the trade of permits that limit the amount of resource use, while negative externalities can be corrected through various policies and regulations. Additionally, in both cases, the socially optimal quantity differs from the individual consumer's optimal quantity, highlighting the need for these solutions.

Like Negative Externalities,tradable Permits Are Useful in Allocating Common Resources