The primary problem with the government subsidies approach is that when a subsidy is for less than 100 percent of the cost, the firm that limits its pollutants must still pay the difference between the actual cost and the subsidy.

Question

Quizplus · Accepted Answer

This is correct. When a subsidy is for less than 100 percent of the cost, the firm still has to pay the difference between the actual cost and the subsidy, even if they limit their pollutants. This can still be a burden on the company and may not provide enough incentive for them to make significant changes in their production processes.

The Primary Problem with the Government Subsidies Approach Is That