If a government regulation states that fluorocarbon emissions should be abated by 75 percent but the optimal level of pollution abatement is 85 percent, which of the following must be true?
A)The free market will not reduce pollution by less than 85 percent.
B)The free market will accomplish 85 percent abatement, but it will be inefficient.
C)If only 75 percent of the pollution is abated, the society will be better off than if 85 percent had been abated.
D)If only 75 percent of the pollution is abated, the society will be worse off than if 85 percent had been abated.
E)If 75 percent of the pollution is abated, then in the next period the government should set the abatement level at 95 percent.

Question

Quizplus · Accepted Answer

If the optimal level is 85 percent and the regulation only requires 75 percent abatement, then society will be worse off than if 85 percent had been abated. This is because the additional 10 percent of abatement would have provided further benefits to society. It is not necessarily true that the free market will accomplish 85 percent abatement, and it is not stated that it would be inefficient. It is also not stated that society would be better off if only 75 percent had been abated, so choice C is false. Choice E is not relevant to the information provided.

If a Government Regulation States That Fluorocarbon Emissions Should Be