Which is more efficient: a market incentive program or a direct regulatory progr

Question

Which is more efficient: a market incentive program or a direct regulatory program?

A. Direct regulatory program B. Market Incentive program

Why?

A. A direct regulatory program is more efficient because direct regulation will provide the optimal framework for people to be able to equate the marginal costs and marginal benefits of their decisions.

B.A market incentive program is more efficient because it makes use of the powerful force of the invisible hand, and unlike the direct regulation approach, it gets people to equate the marginal costs with the marginal benefit.

C. A direct regulatory program is more efficient because direct regulation is the only way for people to take into account the effects of their decisions on people not involved in the trade.

D. A market incentive program is more efficient because the government does not have to be involved in the program.

Explanation / Answer

B. Market Incentive program

B.A market incentive program is more efficient because it makes use of the powerful force of the invisible hand, and unlike the direct regulation approach, it gets people to equate the marginal costs with the marginal benefit.

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