Question: Consider a model in which a manufacturing plant is located upriver from a farm. Production at the manufacturing plant generates waste that is dumped into

Consider a model in which a manufacturing plant is located upriver from a farm. Production at the manufacturing plant generates waste that is dumped into the river and flows downriver towards the farm. The polluted water makes it more costly for the farm to grow its crops. Suppose that the policy maker would like to address this externality but is uncertain about the marginal costs of abatement faced by the manufacturing plant. Discuss the advantages and disadvantages of using Pigouvian taxation and quantity controls to address the negative production externality in the presence of uncertainty about the marginal costs of abatement.

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