The major difficulty with using a tax on pollution instead of a fixed percentage reduction regulation is:
A)that firms would not pay the tax.
B)that it would cause prices to rise.
C)that it only works in theory.
D)establishing the optimal size of the tax.

Question

Quizplus · Accepted Answer

To the extent that it would be difficult to determine the marginal costs of various levels of pollution abatement for various firms, it would be difficult to identify the optimal tax size.

The Major Difficulty with Using a Tax on Pollution Instead