Government Regulators Want to Limit Pesticide Runoff to Its Efficient

Multiple Choice

Government regulators want to limit pesticide runoff to its efficient level. Unfortunately, government regulators are uncertain how marginal abatement costs behave with changes in runoff; fortunately, they do know that marginal abatement costs are less sensitive to changes in runoff than marginal costs of pollution. In this situation, the use of a _____ leads to a smaller deadweight loss than a _____.

A) quota; Pigouvian tax
B) quota; quantity restriction
C) Pigouvian tax; quantity restriction
D) Pigouvian subsidy; Pigouvian tax