Question

A carbon tax would be an efficient method of addressing the problem of global warming because:a. it eliminates the positive externalities associated with global warming.b. it forces firms to internalize the external cost of emissions.c. carbon taxes are an external cost.d. it is less likely than the cap-and-trade policy to result in rising prices.e. fims are likely to prefer the carbon tax over the cap-and-trade policy

Answer 1

Answer:

.b. it forces firms to internalize the external cost of emissions

Explanation:

A carbon tax is a fee imposed by the government on any firm that burns fossil fuels. Fossils most used by firms include gasoline, coal, oil, and natural gases. Burning of these fossils emits greenhouses gases such as carbon dioxide and methane, which creates global warming by heating the atmosphere.

A carbon tax forces enterprises to pay for the harsh effects of global warming on society.  If the tax is set at a high rate, it deters firms from burning fossils.  Companies adopt environmentally friendly production processes to avoid the carbon tax.