The tax approach may be favorable over a direct controls approach to pollution cleanup because
A)all firms face identical costs.
B)large firms are the most likely to reduce their pollution and therefore, have the greatest impact.
C)small firms are most likely to reduce their pollution since they are most efficient at it.
D)firms that have the ability to reduce pollution at the lowest cost do so, while others do not.

Question

Quizplus · Accepted Answer

The tax approach allows firms that have the ability to reduce pollution at the lowest cost to do so, while others may choose not to. This approach creates an incentive for firms to reduce pollution while minimizing the cost to society as a whole. In contrast, a direct controls approach may not take into account the varying costs of pollution reduction for different firms, and could result in higher costs for some firms, leading to potential market inefficiencies.

The Tax Approach May Be Favorable Over a Direct Controls