Which of the following statements is true?
A)Evidence shows that measures to keep the environment clean represent a large percentage of the total costs of production for a firm in a country with strict environmental laws.
B)There are significant incentives for firms to relocate from countries with strict environmental laws to countries with lax environmental regulation.
C)Firms are unlikely to relocate their high-pollution production to countries with lax environmental laws because they fear that such moves will result in adverse effects on their reputations.
D)Imposition of a tax on the production of a particular high-pollution product typically has a greater impact on consumer surplus than on producer surplus.

Question

Quizplus · Accepted Answer

Evidence shows that measures to keep the environment clean can represent a significant cost for firms in countries with strict environmental laws, but this does not necessarily mean it is a large percentage of their total costs of production. Option B is not completely accurate as while there may be some incentives for firms to relocate to countries with lax environmental regulation, there are also risks involved such as reputational damage and potential legal consequences. Option D is incorrect as imposition of a tax on high-polluting products typically has a greater impact on producer surplus than on consumer surplus. Therefore, the correct statement is C as firms may be hesitant to relocate their high-polluting production to countries with lax environmental laws due to concerns about negative impacts to their reputation.

Which of the Following Statements Is True