UGC NET Questions (Paper – 1)

Statements A, B, C, D and F are correct on taxes, subsidies, permits, policy mixes and valuation. Statement E is wrong because economic instruments are intended to reduce pollution when designed well. Therefore A, B, C, D and F only is correct.

Option A:
Option A is incomplete because it omits F.

Option B:
Option B is correct because it includes A, B, C, D and F and excludes E.

Option C:
Option C is incorrect because it includes E (false).

Option D:
Option D is incorrect because it includes E (false) and omits C.

Eco taxes and subsidy reforms work by altering financial incentives so that environmentally harmful activities become more expensive and cleaner alternatives more attractive. These tools are classic examples of economic instruments. The stem explicitly refers to changing prices through taxes and subsidies,so “economic” instruments is the correct description. Option B is therefore right.

Option A:
Command and control instruments rely on regulations that set standards or limits and enforce compliance through penalties. They do not primarily operate by changing prices,so Option A is not suitable here.

Option B:
Economic instruments internalise environmental costs into market decisions by adjusting taxes,subsidies or tradable permits. This aligns exactly with the function described in the question.

Option C:
Informational instruments focus on providing data,labels or awareness to influence behaviour. While useful,they do not directly change price structures in the way eco taxes and subsidy removal do.

Option D:
Voluntary instruments involve self regulation or agreements without legal compulsion. They may accompany economic measures but are not defined by price changes,so Option D does not fit.