Government Regulators Want to Limit Pesticide Runoff to Its Efficient

question 5

Multiple Choice

Government regulators want to limit pesticide runoff to its efficient level. Unfortunately, government regulators are uncertain how marginal abatement costs behave with changes in runoff; fortunately, they do know that marginal abatement costs are less sensitive to changes in runoff than marginal costs of pollution. In this situation, the use of a _____ leads to a smaller deadweight loss than a _____.

• A) quota; Pigouvian tax
• B) quota; quantity restriction
• C) Pigouvian tax; quantity restriction
• D) Pigouvian subsidy; Pigouvian tax

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