When the Government Can Set Emissions Standards for Polluting Industries

question 56

True/False

When the government can set emissions standards for polluting industries, the government should not set emissions standards because the market equilibrium will coincide with the social optimum in the absence of intervention.

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Definitions:

Progressive

Pertaining to a taxation system where the tax rate increases as the taxable amount increases, aiming for a more equitable distribution of wealth.

Inelastic

A characteristic of a good or service whose demand does not change significantly when its price changes.

Efficiency Loss

Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service. Also called deadweight loss.

Perfectly Inelastic

A situation where the demand or supply for a good or service remains unchanged regardless of changes in its price.