Question

. Problems and Applications Q4 Many observers believe that the levels of pollution in our society are too high. True or False: If society wishes to reduce overall pollution by a certain amount, it is efficient to have firms with highest profit bearing the largest burden of reducing pollution and firms with lowest profit bearing the least burden. True False Why are command-and-control approaches generally unable to target the firms that should undertake bigger reductions

Answer 1

Answer:

If society wishes to reduce overall pollution by a certain amount, it is efficient to have firms with highest profit bearing the largest burden of reducing pollution and firms with lowest profit bearing the least burden. FALSE.

If society wishes to reduce pollution then the companies that are more efficient at reducing pollution should be the ones that reduce more. In other words, the companies that incur less cost when reducing pollution should reduce more pollution and those that incur more cost should reduce less.

Why are command-and-control approaches generally unable to target the firms that should undertake bigger reductions?

b. Command-and-control approaches often rely on uniform reductions among firms.

c. There is no incentive to reduce pollution beyond the mandated amount.

Command and control approaches usually use uniform reductions across firms so the firms that need to reduce more pollution are not targeted and end up reducing the same amount of pollution as others.

This problem can be surmounted by offering incentives to the companies that should reduce more pollution so that they reduce more than they are meant to but since no incentives are offered, these companies simply reduce what they are told to reduce and nothing more.