Which of the following is a market incentive to discourage pollution?

• A. Imposing a tax on each unit of pollution emitted
• B. Providing public education about the harms of pollution
• C. Setting strict government regulations without financial penalties
• D. Allowing firms to pollute freely without any restrictions

Answer: (A)

Verified step by step guidance

1. Understand what a market incentive is: it is a financial or economic motivation designed to influence behavior by changing costs or benefits associated with certain actions.
2. Identify the options that involve financial consequences directly linked to pollution, as these create economic incentives for firms to reduce pollution.
3. Recognize that 'Imposing a tax on each unit of pollution emitted' increases the cost of polluting, thus providing a financial reason for firms to reduce emissions.
4. Note that 'Providing public education' and 'Setting strict regulations without financial penalties' do not directly change the economic costs or benefits for firms, so they are not market incentives.
5. Conclude that the option involving a tax is the market incentive because it uses economic costs to discourage pollution.