The command and control regulation.

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Chapter 14, Problem 4SQ

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The command and control regulation.

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Which of the following statements about pollution taxes, cap and trade, or command-and-control standards is FALSE? a.) Pollution taxes strictly control the amount of pollution but leave marginal abatement costs to be determined by the market. Cap-and-trade programs strictly control marginal abatement costs but leave the actual amount of pollution to be determined by the overall level of economic activity. b.) Pollution taxes are unpopular in the U.S. because American companies tend to dislike taxes in general. However, pollution taxes offer firms some greater certainty about how large will be their marginal cost of abatement on the last unit of abatement they will need to do, if they are to minimize the costs they incur both for cleanup and for pollution taxes. c.) Both command-and-control pollution standards, and cap-and-trade programs, can effectively limit the total amount of pollution, but command and control will be least-cost only by accident. Usually,…

What will a corrective tax equal to the external cost imposed on polluters result in? It will increase the level of pollution. It will force polluters to internalize the external cost resulting from their actions. It will eliminate all pollution. It will usually have NO impact whatsoever on pollution levels, but will generate tax revenue for the government.