Due to the concept that economist call asymmetric information, polluting firms can mislead regulators regarding the costs of abatement. It is often in the interest of polluting firms to _________ the costs abatement so that the regulated target for emissions is _______ than the socially efficient level.
A) understate; lower
B) understate; higher
C) overstate; lower
D) overstate; higher

Question

Quizplus · Accepted Answer

Polluting firms may overstate abatement costs to convince regulators to set higher emission targets, allowing them to pollute more than the socially efficient level.

Due to the Concept That Economist Call Asymmetric Information, Polluting