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- Subject
- Externality & Internalityeconomics-mcqs › externality-internality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
Explanation
Tradable pollution permits primarily set a cap on the overall pollution levels allowed. While they do not fix the price of pollution, determine demand, or reduce incentives for innovation, they effectively control the quantity of pollution by limiting emissions.
More Externality & Internality MCQs
Practice related questions from the same subject.
- 1.The gas-guzzler tax imposed on new vehicles with poor fuel efficiency serves as an example of which economic concept?
- 2.Roberto and Thomas share a university dorm room. Roberto enjoys playing loud music, valuing it at €100, while Thomas prefers silence, valuing peace at €150. Assuming Roberto has the legal right to play loud music and there are no costs involved in negotiation, which of the following best describes an efficient outcome to this externality issue?
- 3.Which of the following is not classified as a transaction cost borne by parties when negotiating to address a pollution externality?
- 4.According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?
- 5.What type of external effect is created when a person purchases a vehicle in a heavily trafficked city?
- 6.Which public policy is most effective in addressing a negative externality by internalizing its social costs?
- 7.What is the effect of an unaddressed negative externality on the market quantity produced?
- 8.What results from the presence of a negative externality in a market?
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