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Unformatted text preview: pollution because they can reduce pollution at a lower cost to society. A tax can be set to reduce pollution to the same level as a regulation. The tax has the advantage of letting the market determine the least expensive way to reduce pollution. The tax gives firms incentives to develop cleaner technologies to reduce the taxes they have to pay. 3. List some of the ways that the problems caused by externalities can be solved without government intervention. (15 points) ANS: Externalities can be solved without government intervention through moral codes and social sanctions, charities, merging firms whose externalities affect each other, or by contract....
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This note was uploaded on 01/17/2012 for the course ECON 13 taught by Professor Freed during the Fall '08 term at UC Irvine.
- Fall '08