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Market-based Policies Command-and- control Policies
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Regulates behavior directly. Provides incentives to private decision- makers.
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Corrective Tax 1.Corrective taxes/ subsidies 2. Tradable pollution rights
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Two market-based approaches for solving externalities: Used to induce decision-makers to internalize the externalities.
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External Cost Correct Tax
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AKA Pigouvian tax. What the ideal corrective tax is equal to.
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Corrective Tax External Benefit
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For activities with positive externalities, what the ideal corrective subsidy is equal to. A price on the right to pollute.
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Adoption Incentive Tax on Emissions
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Gives firms incentive to continue reducing emissions as long as the cost of doing so is less than it. Given by taxes to firms if a cleaner technology becomes available.
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Sell Tradable Pollution Permits
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Achieves goal of reducing pollution at lower cost than regulation. Firms with low cost of reducing pollution ____ permits.
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Pollution Reduction Buy
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reducing pollution ____ permits. Concentrated among
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This note was uploaded on 08/30/2011 for the course ECO 2023 taught by Professor Underwood-caputo during the Fall '08 term at University of Central Florida.

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Exam2 - Flashcards3 - The flashcards are formatted for...

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