sometimes market activities production buying and selling have unintended positive 5678665 2

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Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market’s scope. These are called externalities. Assume that you are a policy maker concerned with correcting the effects of gases and particulates emitted by a local power plant. Write a 1-page memo that addresses the following points:

  • Select 1 of the following policies from the following list that you think would best reduce emissions: Pigouvian taxes, emission taxes, or cap and trade. Explain it.
  • Why do you think your policy would work in reducing the total amount of emissions?
  • In your answer, explain the costs and the benefits of the policy that you choose.
  • How would you decide what the best level of emission reduction was?

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