Question

If it is illegal for a nuclear plant to release nuclear waste into a nearby river, then such a policy is an example of

a market-based policy.

a command-and-control policy.

tradable pollution permits.

transaction costs.

Corrective or Pigovian taxes have a different effect from other taxes in terms of economic welfare. Unlike other taxes, corrective taxes

cause deadweight losses.

do not generate revenue for the government.

do not generate deadweight losses.

always affect the buyer more than the seller.

Carbon dioxide emissions from various industrial or transportation sources have been linked to climate change and have thus become increasingly treated as pollutants. A number of governments (including California) have proposed or/and implemented solutions such as carbon taxes or carbon tradable pollution permits also known as carbon cap-and-trade system. What is the difference between carbon taxes and carbon pollution permits?

arbon taxes are a market-based policy while carbon pollution permits are a command-and-control policy.

With a carbon tax the government sets the price on the right to pollute; with cap-and-trade, the government sets the quantity of carbon pollution allowed.

With carbon taxes firms pay for pollution; with carbon pollution permits firms incur no economic costs.

Carbon taxes internalize the pollution externality while cap-and-trade policy does not.

Answer 1

Ans

1 command and control policy because here by Govt dictates some action

2 don't generate deadweight loss since they result in more effort compared ent outcome than is provided by market system. This is achieved by internal using negative externality

3 B is right. In permits case quantity is decided by regulators and price is decided by supply and demand for permits