Which policy tool uses market signals rather than direct orders to reduce negative externalities?Group of answer choicesCommand-and-control regulationPollution taxLiability rulesBans on consumption
Question
Which policy tool uses market signals rather than direct orders to reduce negative externalities?Group of answer choicesCommand-and-control regulationPollution taxLiability rulesBans on consumption
Solution
The policy tool that uses market signals rather than direct orders to reduce negative externalities is the Pollution tax. This approach involves imposing taxes on activities that are harmful to the environment, thereby providing economic incentives for businesses and individuals to reduce their environmental impact.
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