An effluent fee
A) is a reward to companies using production methods that create positive externalities.
B) is also called a pollution subsidy.
C) gives a firm the right to pollute if it pays a tax on what it discharges.
D) is intended to influence the market by increasing supply and decreasing price.

Question

Quizplus · Accepted Answer

An effluent fee gives a firm the right to pollute if it pays a tax on what it discharges. It is a type of market-based instrument which Internalizes the externality of pollution by creating a monetary incentive for firms to reduce their pollution levels. This helps in controlling pollution efficiently as firms will be incentivized to reduce their pollution levels to avoid paying the tax.

An Effluent Fee