6. a. market-based

b. command-and-control

c. command-and-control

d. market-based

e. market-based

7. Even though state or local governments impose these taxes, a company has the flexibility to adopt

technologies that will help it avoid the tax.

8. First, if each firm is required to reduce its garbage output by one-fourth, then Elm will reduce five tons at a

cost of $5,500; Maple will reduce 10 tons at a cost of $13,500; Oak will reduce three tons at a cost of

$22,500; and Cherry will reduce four tons at a cost of $18,000. Total cost of this approach: $59,500. If the

system of marketable permits is put in place, and those permits shrink the weight of allowable garbage by

one-quarter, then pollution must still be reduced by the same overall amount. However, now the reduction

in pollution will take place where it is least expensive.

Reductions in Garbage Who does the reducing? At what cost?

First 5 tons

Second 5 tons

Third 5 tons

Cherry

Cherry

Cherry

Fourth 5 tons
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