As compared to a pollution tax, a command-and-control policy will increase production costs by a ________ amount and increase equilibrium price by a ________ amount.
A) larger; larger
B) larger; smaller
C) smaller; larger
D) smaller; smaller

Question

Quizplus · Accepted Answer

A command-and-control policy typically mandates specific technologies or reductions in emissions, which can be more costly for firms to implement compared to a pollution tax that allows firms more flexibility in how they reduce pollution. This increased cost of compliance is likely to be passed on to consumers in the form of higher prices.

As Compared to a Pollution Tax, a Command-And-Control Policy Will