When the government can set emissions standards for polluting industries, which of the following statements is correct?
A)The government should set the emissions standard to zero because pollution is bad for people.
B)The government should set the emissions standard to achieve the socially optimal level of production which, in general, is not equal to zero.
C)The government should employ emissions taxes instead because emissions standards cannot generally achieve the social optimum.
D)The government should not set emissions standards because the market equilibrium will coincide with the social optimum in the absence of intervention.

Question

Quizplus · Accepted Answer

Setting the emissions standard to zero may not be socially optimal because it could result in the shutting down of industries or reducing their production to levels that are not efficient. Thus, the government should set the emissions standard to achieve the socially optimal level of production, which takes into account the costs and benefits of pollution control.

Option A is not a practical option as it does not consider the economic costs of pollution control measures.

Option C suggests an alternative to emissions standards, but it is not the only solution. Emissions taxes may also be used in conjunction with emissions standards to achieve the socially optimal level of production.

Option D assumes that the market equilibrium will automatically lead to the social optimum, but this is not always the case. The market may not account for the external costs of pollution, which could result in overproduction and higher pollution levels than what is socially desirable. The socially optimal level of production balances the costs and benefits of pollution reduction, taking into account the preferences of society. It may not necessarily be zero emissions. Setting the emissions standard to achieve the socially optimal level of production will ensure that pollution levels are reduced to an efficient level without unduly harming economic growth.

When the Government Can Set Emissions Standards for Polluting Industries