When firms in a polluting industry have different costs for the technology to reduce pollution,which of the following is efficient?

Question

Quizplus · Accepted Answer

Mandating that each firm reduce pollution up to the point at which the marginal cost of reducing pollution for each firm is equal to the marginal social benefit of the reductions is efficient because it ensures that the reductions are made where they have the greatest benefit for society. This approach takes into consideration the different costs of pollution reduction technologies for each firm and ensures that they all reduce pollution to the efficient level. This approach also avoids imposing unnecessary costs on firms that have higher costs of reducing pollution than others.

When Firms in a Polluting Industry Have Different Costs for the Technology