Assume there are two types of communities in Pakistan, those in which there is a high benefit of pollution control and a high cost of pollution control, and those in which there is a low benefit of pollution control and a low cost of pollution control. Assume that the government must set either uniform regulations (a uniform level of pollution control) or a uniform fine for pollution.

a. Show diagrammatically that a regulatory scheme may be preferable to a system of fines.

b. How does your answer change if communities in which there is a high marginal cost of pollution control happen to be communities in which there is a low marginal benefit; and communities with a low marginal cost of pollution control happen to be communities in which there is a high marginal benefit