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Sagot :
Command-and-control regulation may be better than a corrective tax if C. The negative externality is so large that the optimal quantity is zero.
It should be noted that a corrective tax is important as it helps to achieve a socially optimal quantity. It is a market-based policy that is used by the government in order to address negative externalities.
In a situation where the corrective tax is zero, it won't be socially optimal. This is because the marginal social benefit will be more than the marginal private benefit. Therefore, for such a large negative externality, then a command and control regulation will be better.
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