A pollution-control policy that,in principle,can perfectly internalize pollution externalities is

Question

Quizplus · Accepted Answer

An emissions tax can internalize the pollution externality because it provides a financial incentive for firms to reduce their emissions. By taxing firms based on the pollution they emit, the government is effectively internalizing the social cost of pollution and encouraging firms to minimize their emissions. Emission limits and fines can also help to reduce pollution, but they are less effective at internalizing the externality because they do not provide the same financial incentive for firms to reduce their emissions. Moral suasion, which relies on persuasion and encouragement rather than financial incentives, is unlikely to be effective on its own in internalizing pollution externalities. Therefore, the best choice is an emissions tax.

A Pollution-Control Policy That,in Principle,can Perfectly Internalize Pollution Externalities Is