Multiple Choice
If error in setting the policy is possible,
A) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively flat.
B) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively steep.
C) a standard generates smaller welfare losses than a fee when the MSC is relatively steep and the MCA is relatively flat.
D) a standard generates smaller welfare losses than a fee when the MSC is relatively flat and the MCA is relatively steep.
E) errors in standards and fees have equal welfare losses, so long as the errors are the same in percentage terms.
Correct Answer:
Verified
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