Chapter 14R, Problem 4MCQ

To determine

The correct option for policy changes that would be the most likely to provide a gain in efficiency while achieving the same goal of reducing pollution.

Answer to Problem 4MCQ

From the available options, the correct option is tradable emissions permits instead of environmental standards.

Explanation of Solution

As the tradable emissions permits provide the right or allow the firms to produce a certain amount of pollution and it creates the chance to exchange efficiently, therefore, trade emissions permit instead of environmental standards is correct. Whereas, Concentration on environmental standards instead of benefits and taxes increases the restrictions on industries or individuals to not produce pollution or provides any kind of benefit by polluting in a certain amount. Therefore, all options: a, b, c, and d are incorrect.s

Here, the correct option is e (tradable emissions permits instead of environmental standards).

Economics Concept Introduction

Introduction: Externality problems such as pollution refer to the fundamental economic policy problems while firms do not internalize the indirect costs or indirect benefits from any of their economic transactions in the market.