Check Your Understanding

1. Question

   Some opponents of tradable emissions permits object to them on the grounds that polluters that sell their permits benefit monetarily from their involvement in polluting the environment. Assess this argument.

2. Question

   For each of the following cases, explain whether an external cost or an external benefit is created and identify an appropriate policy response.

   1. Trees planted in urban areas improve air quality and lower summer temperatures.

   2. Water-saving toilets reduce the need to pump water from rivers and aquifers. The cost of a gallon of water to homeowners is virtually zero.

   3. Old computer monitors contain toxic materials that pollute the environment when improperly disposed of.