As compared to a pollution tax, a command-and-control policy will
A) increase production costs by a smaller amount.
B) increase price by a smaller amount.
C) shift the supply curve to the left by a smaller amount.
D) shift the supply curve to the left by a larger amount.

Question

Quizplus · Accepted Answer

A command-and-control policy restricts firms' behavior and requires them to comply with specific rules, such as emission standards. This type of policy may force firms to adopt costly pollution control technologies, increasing their production costs and decreasing their supply. As a result, the supply curve will shift to the left by a larger amount than a pollution tax, which only increases the marginal cost of production by a certain amount per unit of pollution emitted. Therefore, a command-and-control policy is more likely to have a larger impact on the market than a pollution tax.

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