-Refer to the Diagram Above

Multiple Choice

-Refer to the diagram above.Generally speaking,most remedies for external costs due to pollution in Canada have not been through taxation but regulations requiring firms to use a specific type of pollution-reduction technology.For the regulation to lead to the socially optimal level of output,one must assume that

A) firms will simply choose to go out of business and eliminate the externality.
B) requiring the technology will increase costs such that the private supply,S,shifts to S1.
C) it is easier to regulate than to tax.
D) requiring the technology will shift the social supply curve,S1,to S.
E) the best way to reduce pollution is to force firms to use a particular technology.