Final answer:
Command-and-control policies generally reduce the production of a polluting good more than do pollution taxes, by requiring firms to install specific anti-pollution technology and comply with set pollution limits. Therefore, the correct answer is option B. reduce the production of a polluting good more than do pollution taxes.
Step-by-step explanation:
Command-and-control policies usually reduce the production of a polluting good more than pollution taxes. These policies often require the installation of certain equipment or specify allowable quantities of pollution for firms, thus requiring them to take the social costs of pollution into account. Consequently, this can lead to a decrease in production and an increase in price, as firms face higher costs due to compliance with these regulations. Unlike a pollution tax that provides a financial incentive to reduce emissions while allowing firms some flexibility in how to do so, command-and-control regulation mandates specific actions and technologies.
An underlying assumption of command-and-control regulations is that all firms adopt the same approach to pollution control, which can be inefficient as firms have different technologies and production costs. Where these regulations are implemented, they typically do not provide incentives for firms to reduce pollution beyond the mandated standards, potentially limiting further environmental improvements.