If transactions costs are very high and auctions for pollution permits are not possible, which of the following is the most effective way to deal with pollution?
A)Allow the parties to negotiate
B)Tax pollution
C)Require all polluters to limit their pollution to a certain level with regulation
D)Give subsidies to reduce pollution

Question

Quizplus · Accepted Answer

Taxing pollution directly addresses the issue by making it more costly for businesses to pollute, thereby incentivizing them to reduce emissions. This method does not rely on auctions or low transaction costs to be effective.

If Transactions Costs Are Very High and Auctions for Pollution