An important reason that direct controls are usually inefficient in reducing pollution is that

Question

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Direct controls do not consider the different marginal costs of pollution abatement for different firms. As a result, some firms may end up spending more to comply with the regulations than the environmental benefits they produce. Other firms may simply ignore or circumvent the regulations because the costs of compliance are too high. This inefficiency can be avoided by implementing market-based policies such as emissions taxes or cap and trade systems, which provide firms with an incentive to reduce pollution at the lowest cost.

An Important Reason That Direct Controls Are Usually Inefficient in Reducing