| Question |
True or False: 1. Eliminating nearly all pollution would lead to economic efficiency and healthier lifestyles for all. 2. Economists believe that pollution reduction is likely subject to diminishing returns. 3. In practice, it is very difficult to determine the appropriate pollution tax to levy to correct for a negative externality. 4. Under a system of transferable pollution rights, firms with relatively high abatement costs will sell rights to pollute to firms with relatively low abatement costs. 5. In order for a transferable pollution rights system to work, the EPA needs to know the cheapest way for each polluter to reduce pollution. 6. Transaction costs must be low for well-defined property rights to lead to the internalization of externalities. 7. The problem of externalities can be viewed as a question of how property rights should be assigned. 8. According to the Coase theorem, if transaction costs are high it is unlikely that private negotiations can resolve an externality problem and achieve social efficiency. |
