Question

Suppose the government requires each firm to reduce sulfur dioxide emissions by an equal amount such that total emissions are reduced by 7.0 million tons per year. Is this approach necessarily economically efficient? This command-and-control approach is efficient because reducing sulfur dioxide pollution by 7.0 million tons per year is where the marginal cost and marginal benefit of pollution reduction are equal. is efficient because each firm is reducing pollution by the same amount. is not efficient because some firms may still be generating pollution. is not efficient because firms can have different costs of reducing pollution. is efficient because it does not require the government to know the firms' cost of reducing pollution.

Answer 1

Answer:

is not efficient because firms can have different costs of reducing pollution.

Explanation:

Economic efficiency is the way a business maximises the use of factors of production (land, labor, capital) to produce output at a reduced cost. Efficiency aims to improve output and reduce cost to the barest minimum.

In this instance to individual cost required to reduce sulfur dioxide emissions is not considered by the government.

Since reduction of sulfur dioxide is equal among firms, some smaller ones may incur cost that will financially impair them and put them out of business.

While bigger firms will easily bear the cost.