2430EconomicsMedium
Suppose an industry emits a negative externality such a pollution and the possible methods to internalize the externality are command-and-control policies, pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency ease of implementation and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favored to least favored)?
Atradable pollution permits, Pigouvian taxes, command-and-control policies
BPigouvian taxes, command-and-control policies, tradable pollution permits.
CThey would all rank equally high because the same result can be obtained from any one of the policies
Dcommand-and-control policies, tradable pollution permits, Pigovian taxes.
Etradable pollution permits command-and-control policies, Pigovian taxes.
Correct answer
A. tradable pollution permits, Pigouvian taxes, command-and-control policies
Explanation
The correct answer is tradable pollution permits, Pigouvian taxes, command-and-control policies.