Why Might Regulating Externalities Be a Bad Idea?
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Why might regulating externalities be a bad idea compared with other alternatives?
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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.
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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, ...
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