Suppose a company moves its most polluting production to a factory in a developing country where it knows environmental regulation is less strict than in its home location. In the new location the firm's output is likely to:

Question

Quizplus · Accepted Answer

The company is likely to produce more than the efficient level of output because it is taking advantage of the less strict environmental regulations, which allows it to externalize the environmental costs and produce more than what would be considered efficient if those costs were internalized.

Suppose a Company Moves Its Most Polluting Production to a Factory