Question

Tradable permits are likely to result in less inefficiency, relative to a pollution tax, when ...

	a.	the marginal costs of damages are steep and the marginal costs of pollution reduction are relatively stable.
	b.	the marginal costs of damages are steep and the marginal costs of pollution reduction are steep.
	c.	the marginal costs of damages are relatively stable and the marginal costs of pollution reduction are relatively stable.
	d.	the marginal costs of damages are relatively stable and the marginal costs of pollution reduction are steep.
	e.	the marginal costs of damage are elastic and the marginal costs of pollution reduction are also elastic.

An example of nonpoint source pollution is ...

	a.	an automobile.
	b.	a factory.
	c.	a drain pipe.
	d.	an agricultural field.
	e.	a landfill.

Answer 1

1) Option C :- the marginal costs of damages are relatively stable and the marginal costs of pollution reduction are relatively stable.

The tradable permits are likely to result in less inefficiency, relative to a pollution tax, when the marginal costs of damages are relatively stable and the marginal costs of pollution reduction are relatively stable.

• Tradable permits are used to reduce the pollution.
• They are inefficient when there is a relatively stable marginal cost of damage and the marginal cost of pollution

2) Option D - An agricultural field.

• An agricultural field is an example of nonpoint source pollution
• The use of fertilizers in the agricultural field is a nonpoint source pollution
• Nonpoint source pollution is the pollution caused by many diffuse sources

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