Under the EPA's tradable allowances program, clean energy is _ and dirty energy is _

Marketing Dec 28, 2020

Under the EPA's tradable allowances program, clean energy is _____ and dirty energy is _____.

a. taxed; subsidized

b. subsidized; subsidized

c. subsidized; taxed

d. taxed; taxed

Deadweight loss results when a good generates external benefits. False True

Expert Solution

c. subsidized; taxed

Clean energy generates positive externality. Therefore, the subsidies will help to increase the consumption of clean energy and therefore maximize positive externality. On the other hand, dirty energy generates negative externality. Hence, the companies involved in such activities are taxed for them to meet the cost of polluting the environment.

False

Deadweight loss comes from market distortions such as taxes and price controls that cause a reduction in total surplus.

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