Suppose an industry emits a negative externality such a pollution and the possible methods to internalize the externality are command-and-control policies, pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency ease of implementation and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favored to least favored) ?
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Answer:
Suppose an industry emits a negative externality such a pollution and the possible methods to internalize the externality are command-and-control policies, pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency ease of implementation and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favored to least favored) tradable pollution permits, Pigouvian taxes, command-and-control policies.
