Direct pollution controls are likely to be inefficient because

Question

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Direct pollution controls that are imposed on firms with different pollution abatement costs are likely to be inefficient because these costs are not equivalent. For example, a regulation to reduce pollution to a certain level may be feasible and cost-efficient for one firm but not for another. This could lead to a situation where some firms are producing less than the socially optimal amount of output, while others may be producing more. Thus, direct pollution controls can result in inefficiencies and a misallocation of resources.

Direct Pollution Controls Are Likely to Be Inefficient Because