- Describe the circumstances under which it would be better for the government to sell pollution permits than to levy a corrective tax.
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In some cases, pollution permits may be better than a Pigovian tax because: a. Pollution permits allow for a market solution, while a Pigovian tax does not. b. Pollution permits generate more revenue for the government than a Pigovian tax. c. Pollution permits are never preferred over a Pigovian tax. d. The government can set a maximum level of pollution using permits.
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Explain: "Without a market for pollution rights, dumping pollutants into the air or water is costless; in the presence of the right to buy and sell pollution rights, dumping pollutants creates an opportunity cost for the polluter." What is the significance of this opportunity cost to the search for better technology to reduce pollution?
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