Suppose you were asked to comment on a proposed policy to control oil spills. since the average cost of an oil spill has been computed as $x, the proposed policy would require any firm responsible for a spill immediately to pay the government $x. is this likely to result in the efficient amount of precaution against oil spills? why or why not?

An oil spill is what is known in economics as an externality. An externality is an event that affects a third party (people or in this case, other living organisms, that are not part of the corporation).

The proposed policy is the most common manner in which governents deal with externalities: making companies pay for the costs.

In a way, this could be an efificient policy because it would make companies become more cautious since they will not want to incurr in those costs. However, it can be argued that there are even more efficient ways to avoid oils spills, such as demanding higher safety standards, or transitioning from oil to green energies.

So the answer would be, it is an efficient policy, but there are policies that can be more efficient, and thus, should be considered as well.

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answer; /// the correct answer is (a) burned the city;