Average: /3 Attempts: 3. Problems and Applications Q4 Many observers believe tha

Question

Average: /3 Attempts: 3. Problems and Applications Q4 Many observers believe that the levels of pollution in our society are too high. True or False: If society wishes to reduce overall pollution by a certain amount, it is efficient to have firms with lower costs reduce greater amounts of pollution than those with higher costs. True False Which of the following statements is true about command-and-control approaches to reducing pollutions? Check all that apply. There is no incentive to reduce pollution beyond the mandated amount Command-and-control approaches are generally unable to target the firms that should undertake bigger reductions. Command-and-control approaches often rely on uniform reductions among firms.

Explanation / Answer

1) Solution: True

Explanation: It is efficient to have different amounts of pollution reduction at different firms as reduction cost for the pollution differs across firms.

2) Solution:

--There is no incentive to reduce pollution beyond the mandated amount

--Command-and-control approaches are generally unable to target the firms that should undertake bigger reductions

--Command-and-control approaches often rely on uniform reductions among firms.

Explanation: Command-and-control approaches that rely on uniform pollution reduction among firms provide the firms no incentive to reduce pollution beyond the mandated amount. Although every firm will reduce pollution by just the amount needed and no more

3) Solution:

--Corrective taxes or tradable pollution rights give firms greater incentives to reduce pollution.

--The government does not have to figure out which firms can reduce pollution the most

Explanation: Firms are provided rewards in terms of paying lower taxes or spending less on permits if they find methods for reducing the pollution, thus they have the incentive to engage in research on pollution control. The government need not have to figure out which firms can reduce pollution the most it lets the market provide the firms the incentive to reduce pollution on their own.

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