ABSTRACT
This chapter examines the effects of various different forms of pollution standards on input decisions, the level of production, and firm profits. When economists refer to pollution standards, they almost universally mean uniform restrictions on pollution emissions. The original analysis assumed that an individual firm was being regulated and that the different standards would all result in the same total level of pollution. The different forms of pollution constraints have some similar patterns, but each has its own peculiarities. In the one-firm analysis, all the standards were oriented to produce the same total emissions from the one firm. Comparisons between the standards are more interesting, but they are also more difficult to make, since they depend heavily on the shapes of the isoprofit contours. The results show that the different standards, by providing firms with different incentives, change the firm's allocation decisions and affect the relative profitability of the standards.
