• Which of these does NOT generate a negative externality?

a. A manufacturer buys a pollution permit and then emits carbon as a waste product.

b. A manufacturer dumps waste in a nearby river.

c. A smoker has a cigarette in a crowded restaurant.

d. Every year Mary gets a flu shot

• A cap and trade policy is desirable because it

a. Reward firms for reducing pollution.

b. has proven to be an inefficient way to reduce pollution

c. is not a market-based solution to pollution.

d. punishes all firms equally.