Complete Question:
Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives.
Group of answer choices:
A. draw distinctions; lower the social costs incurred.
B. lack incentives; prohibit firms from having flexibility.
C. create incentives; allow firms some flexibility.
D. specify particular technology; lower the social costs incurred.
Answer:
C. create incentives; allow firms some flexibility.
Explanation:
Market-oriented environmental tools create incentives for firms to take the social costs of pollution into account and allow firms some flexibility in reacting to these incentives.
The market-oriented environmental tools to pollution control are generally classified into three (3) main categories, these are;
1. Pollution charges: also known as effluent charges, it is the taxation on the amount of pollution that is emitted by a company into its surroundings. This simply means that, for every quantity of pollution emitted by firms, they are made to pay an equivalent pollution charge for it. Hence, a pollution charge gives firms the incentive to mitigate pollution as much as possible.
2. Better-defined property rights: a property right that is well defined would ensure no one is allowed to encroach or trespass on the property owned by another without paying necessary compensations.
3. Marketable permits: these are permits which are being given by cities or state governments to firms and primarily regulates the quantity of pollution allowable in accordance with the federal pollution enforcement agency. The marketable permits can either be sold or given freely to the firms by the government. For example, an individual might own a property right preventing others from burning in his field. Also, property rights approach to environmental issues is very much relevant and applicable to the endangered species.
In conclusion, the market-oriented environmental tools allow firms some flexibility in reacting to these incentives as they have a choice of selecting which is more appropriate for their businesses.
