When using the economic efficiency approach to controlling air and water pollution, the government
A)forces each firm to produce emissions in the most cost efficient manner irrespective of its cost structure
B)offers each firm the flexibility to reduce emissions in the most cost effective manner, given its unique cost structure
C)offers each firm the option of choosing between the cost minimizing emission level and the profit maximizing emission level
D)provides each firm with some fixed rules and then requires them to maximize profits given these fixed rules
E)offers each firm the option of using marginal cost pricing and average cost pricing when determining the optimum emissions levels

Question

Quizplus · Accepted Answer

The economic efficiency approach suggests that each firm should be given flexibility to reduce emissions in the most cost-effective way according to its unique cost structure. This is because different firms may have different production processes and cost structures, and hence, their optimal pollution reduction methods may vary. Therefore, option B provides the best approach for controlling air and water pollution efficiently.

When Using the Economic Efficiency Approach to Controlling Air and Water