Which of the Following Explains the Difference Between Command and Control

question 53

Multiple Choice

Which of the following explains the difference between command and control policies and tradeable allowances?

• A) Command-and-control policies are a government solution to externalities, whereas tradeable allowances are a type of private market solution.
• B) Tradeable allowances allow for less flexibility than command and control policies.
• C) Command-and-control policies require all firms to reduce pollutants by a specific quantity, whereas tradeable allowances allow some firms to pollute more than others by trading for pollution rights.
• D) Tradeable allowances sometimes result in higher overall levels of pollutants because firms can simply purchase the rights to pollute more, whereas the quantity of pollution is fixed under command and control.

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Definitions:

Principal-agent Problems

Situations where there is a conflict of interest between a principal (such as an owner or shareholder) and an agent (such as a manager), due to diverging goals or asymmetrical information.

Industrial Regulation

Government rules and regulations aimed at controlling the activities, standards, and behaviors within specific industries to ensure fairness, safety, and competition.

Natural Monopoly

A market condition where a single supplier is most efficient in providing goods or services due to high fixed or startup costs.

Industrial Regulation

The government policies and rules designed to control or direct economic activity and market forces within specific industries.