12.3 Flashcards
(8 cards)
What is a pollution charge?
A tax based on pollution levels.
What is the purpose of a pollution charge?
Encourages firms to find cost-effective ways to reduce pollution.
How do firms respond to a pollution charge?
Firms with lower-cost reduction options will reduce pollution to avoid the tax.
What is an example of a pollution charge?
If a pollution charge is $1,000: A firm will reduce pollution by 30 pounds if the cost is $900, as it’s cheaper than paying the tax.
Example of a firm reducing pollution to avoid tax costs.
What are marketable permits?
Firms receive permits allowing limited pollution.
What can firms do with unused permits?
If a firm pollutes less, it can sell its unused permits to others.
What are property rights?
Legal ownership rights that others cannot infringe upon without compensation.
Why are property rights important?
Important for environmental issues like protecting endangered species on private land.
