Which of the following statements is TRUE?
A) Mandating that every firm emit no more than X amount of pollutants is the most efficient method of reducing pollution.
B) A system of tradeable allowances increases pollution because firms can pay for the right to pollute.
C) To maximize social surplus, the burden of reducing pollution should be allowed to vary by industry.
D) If the EPA cares about the sum of consumer and producer surplus, they should ignore the impact of pollution reduction on the profitability of firms.

Question

Quizplus · Accepted Answer

To maximize social surplus, the burden of reducing pollution should be allowed to vary by industry because some industries have higher costs of reducing pollution than others. Mandating every firm to emit no more than a certain amount of pollutants is not necessarily the most efficient method because firms may have different costs of reducing pollution. A system of tradeable allowances does not necessarily increase pollution because it provides incentives for firms to reduce pollution and rewards those who do. Ignoring the impact of pollution reduction on the profitability of firms is not advisable because it can have unintended consequences on the economy.

Which of the Following Statements Is TRUE