If the marginal costs of pollution abatement are different across firms,then regulations that require fixed percentage reductions in pollution will be

Question

Quizplus · Accepted Answer

If marginal costs of pollution abatement are different across firms, then fixed percentage reductions in pollution will not be efficient because some firms may incur very high costs to meet the regulation, while others could meet the same requirement much more easily and cheaply. This can lead to inefficiencies and may not be fair to firms with higher marginal costs. Instead, regulations should be based on a firm's marginal abatement costs to achieve an optimal reduction in pollution at the least possible cost to society.

If the Marginal Costs of Pollution Abatement Are Different Across