716Chapter 10/Externalities58.Which of the following isnotan effective method to reduce negative externalities?a.relying on voluntary complianceb.taxing the output of industries that pollutec.creating legal environmental standardsd.increasing public spending on cleanup and reduction of pollutionANS:ADIF:2REF:10-2NAT:AnalyticalLOC:Markets, market failure, externalitiesTOP:Corrective taxes | Command-and-control policiesMSC:Applicative59.What is the difference between command-and-control policies and market-based policies towardexternalities?a.Command-and-control policies provide incentives for private decisionmakers to solve the problemson their own, whereas market-based policies regulate behavior directly.b.Command-and-control policies rely on taxes, whereas market-based policies rely on quotas.c.Command-and-control policies regulate behavior directly, whereas market-based policies provideincentives for private decisionmakers to change their behavior.d.Command-and-control policies are efficient, whereas market-based policies are inefficient.ANS:CDIF:1REF:10-2NAT:AnalyticalLOC:Markets, market failure, externalitiesTOP:Command-and-control policiesMSC:Definitional60.Which of the following statements isnotcorrect?a.Patents help internalize the externalities associated with technological advances.b.Economists typically prefer regulations to corrective taxes because regulations provide moreincentives for firms to seek continued reductions in pollution.c.Allowing firms to trade pollution permits will lower the total cost of reducing pollution.d.A big impediment to implementing the Coase theorem in many cases is high transactions costs.ANS:BDIF:3REF:10-2NAT:AnalyticalLOC:Markets, market failure, externalitiesTOP:Command-and-control policies | Tradable pollution permitsMSC:Analytical
