When the government uses a command-and-control policy to solve an externality, it:
A) usually involves taxing the consumption of a commodity.
B) relies on the Coase theorem to structure the policy.
C) creates policies that directly regulate behavior.
D) is usually the most effective policy option available.

Question

Quizplus · Accepted Answer

Command-and-control policies directly regulate behavior to address negative externalities. This can include setting emissions standards for factories or requiring cars to meet certain fuel efficiency standards. While effective in controlling externalities, these policies can be costly and may not be as flexible as other policy options.

When the Government Uses a Command-And-Control Policy to Solve an Externality