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Economics (AS & A Level) · Oct / Nov 2021 · Paper 31 · Question 14

9708Government policies to achieve efficient resource allocation and correct market failure

To tackle pollution, some governments set standards, such as production limits, while others use tradeable pollution permits. What is a correct comparison of the two approaches?

  1. AStandards give more incentive for continued pollution reduction.
  2. BStandards make greater use of the market mechanism.
  3. CTradeable pollution permits are simpler to devise and administer.
  4. DTradeable pollution permits provide a more equitable treatment of firms.

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Correct answer: D. Tradeable pollution permits provide a more equitable treatment of firms.

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