When pollution (a negative externality) is created by firms, which of the following is NOT a valid way for the government to restore the social optimum?
A) require firms to install pollution-abatement equipment
B) require firms to change production techniques to reduce emissions
C) levy a tax on the production of the good
D) require firms to pay for the environmental damage they create
E) offer a subsidy to firms to reduce their production cost
Correct Answer:
Verified
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