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Why Might Regulating Externalities Be a Bad Idea?

Why might regulating externalities be a bad idea compared with other alternatives?

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The main idea is that standards are less efficient than taxes and pollution rights because they are not responsive to differences across firms or across regions. Also, ...

Solution Summary

This solution is a very simple and short answer to the question posed. Specifically, it explains why regulation of externalities is a bad idea and provides two specific alternatives.