The reason why cleanup costs are lower for a taxes approach than for a direct controls approach is that
A)all firms reduce pollution equally and fairly.
B)firms that are able to clean up at lowest cost do so; others don't.
C)large polluters clean up the most, which is always lowest cost.
D)small polluters clean up the most, which is generally the cheapest.

Question

Quizplus · Accepted Answer

In a taxes approach, firms that are able to clean up at the lowest cost will do so, while others that find it more expensive will pay the tax instead. This ensures that overall cleanup costs are lower because the most cost-effective polluters clean up first. In contrast, in a direct controls approach, all firms are required to reduce pollution by the same amount, regardless of their ability to do so at a lower cost. This can lead to higher overall cleanup costs. Eliminate choices A, C, and D since they do not correctly explain why cleanup costs are lower under a taxes approach.

The Reason Why Cleanup Costs Are Lower for a Taxes