Question: A government is deciding between command and control solutions versus tax and subsidy solutions to solve an externality problem. In each case, explain why you think one is better, using arguments from the chapter.
a. Suppose that whales are threatened with extinction because a large number of people like to eat whale meat. Governments are torn between banning all whaling except for certain religious ceremonies and heavily taxing all whale meat. Assume that only a few countries in the world consume whale meat, and that they have fairly efficient governments.
b. Fires create external costs because they spread from one building to another. Should governments encourage subsidies to sprinkler systems or should they just mandate that everyone have sprinklers?
c. Pets who procreate can create external costs due to problems with stray animals. Strays are extremely common on the streets of poor countries. Sterilization can solve the problem, but is a tax/subsidy or command and control a better method to encourage sterilization? Does the best solution depend on the sex of the animal?