When using the economic efficiency approach to control air and water pollution,the government _____
A)forces each firm to produce emissions in the most cost-efficient manner irrespective of its cost structure.
B)offers each firm the flexibility to reduce emissions in the most cost-effective manner, given its unique cost structure.
C)offers each firm the option of choosing between the cost-minimizing emission level and the profit-maximizing emission level.
D)provides each firm with fixed rules for reducing pollution.
E)offers each firm the option of using either total cost pricing or average cost pricing when determining the optimum emission level.

Question

Quizplus · Accepted Answer

The economic efficiency approach involves offering each firm the flexibility to reduce emissions in the most cost-effective manner given its unique cost structure. This allows firms to make decisions that balance the costs of pollution control with their overall profitability. It is not feasible for the government to force each firm to produce emissions in the most cost-efficient manner irrespective of its cost structure, as some firms may have different capabilities for pollution control. Offering fixed rules for reducing pollution may not be efficient, as it fails to take into account the differences in costs and benefits across firms. The option of choosing between the cost-minimizing emission level and the profit-maximizing emission level may also not be efficient, as it may not consider the externalities imposed on society by pollution. The option of using total cost pricing or average cost pricing is not relevant in this context.

When Using the Economic Efficiency Approach to Control Air and Water