Question

Command-and-control (sometimes called direct control) is when the government passes legislation specifically regulating an activity (typically because it leads to market failure). Indicate which of the following six statements are true and which are false.1. Under command-and-control regulation, the government will sometimes specify the technology that firms must use in production.2. The government may decide on a specific amount of pollution that firms can legally emit.3. A limitation of a command-and-control regulation is that firms have no incentive to remove pollution once they are within the legal pollution limits.4. Command and control situations are always the best option when it comes to reducing the amount of pollution.5. Command-and-control is more flexible than market-based regulation.6. A command-and-control regulation is subject to political considerations

Answer 1

Answer:

1. Under command-and-control regulation, the government will sometimes specify the technology that firms must use in production. TRUE, e.g. currently the US government banned Huawei from providing 5G technology in the US due to security concerns even though that provides the best 5G technology in the world.

2. The government may decide on a specific amount of pollution that firms can legally emit. TRUE, the EPA sets the standards and companies must follow them, whether they are too high or too low maybe subject to an extensive debate.

3. A limitation of a command-and-control regulation is that firms have no incentive to remove pollution once they are within the legal pollution limits. TRUE, if the company is complying with current regulation, then that is all it needs to keep functioning without any problem.

4. Command and control situations are always the best option when it comes to reducing the amount of pollution. FALSE, when is the government or Congress the most efficient at doing something. Efficiency is not a characteristic of any government entity.

5. Command-and-control is more flexible than market-based regulation. FALSE,  the terms command and control should give you an idea that government intervention can be anything but flexible.

6. A command-and-control regulation is subject to political considerations. TRUE, command and control regulation is set up by government agencies or Congress and both are political entities by definition. E.g. some governments impose harder environmental controls through the EPA, others impose softer or no controls at all.