Direct controls are generally much more costly than emissions taxes because
A)under direct controls emissions cutbacks are usually not apportioned among the firms on the basis of their ability to reduce pollution cheaply and efficiently.
B)emissions tax per unit of output is higher than the per-unit direct control program cost.
C)government cannot legally levy emissions taxes that are as high.
D)firms disregard emissions taxes.

Question

Quizplus · Accepted Answer

Direct controls do not take into account the different costs of reducing pollution among firms, which can make them more expensive overall compared to emissions taxes. With emissions taxes, firms have an incentive to reduce their pollution in the most cost-effective way possible, which can lead to overall lower costs.

Direct Controls Are Generally Much More Costly Than Emissions Taxes