Compared to a fixed percentage reduction regulation, a tax on pollution encourages:
A)firms to reduce pollution by the same percent.
B)firms to use the same technology to reduce pollution.
C)firms that can more cheaply reduce pollution to make larger reductions.
D)big firms to make larger reductions because they can more easily afford it.

Question

Quizplus · Accepted Answer

A tax would encourage firms that have lower marginal cost of reducing pollution to do more of the abatement because their costs of doing so would be lower.

Compared to a Fixed Percentage Reduction Regulation, a Tax on Pollution