Answer
a) The costs of lowering pollution are different for different firms.
b) There is no reason to reduce pollution below the required amount.
c) The corrective taxes or tradable rights would provide an incentive for larger firms to reduce pollution.
Work Step by Step
a) If all firms were forced to lower pollution levels equally, the costs would be too burdensome for some firms and low for other firms.
b) Larger firms would be told to reduce their pollution levels further, but they would receive no further incentive to reduce their levels.
c) Larger firms would be incentivized to determine how to lower their pollution levels (with the corrective taxes and tradable rights).
