Assume that the government can reduce car pollution using either a corrective tax or a regulatory scheme,both of which will achieve the same results in the short-run.In the long run,however,the regulatory scheme will be more efficient because it provides incentives to avoid the regulation altogether.

Question

Quizplus · Accepted Answer

A corrective tax is generally considered more efficient in the long run because it provides continuous incentives for all firms to reduce pollution and innovate cleaner technologies, whereas a regulatory scheme often sets a fixed standard without encouraging further improvements beyond the regulation.

Assume That the Government Can Reduce Car Pollution Using Either