Suppose that a government agency is trying to decide between two pollution reduction policy options. Under the permit option, 100 pollution permits would be sold, each allowing emission of one unit of pollution. Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit. Under the pollution tax option, firms would be taxed $250 for each unit of pollution emitted. The regulated firms all currently pollute and face varying costs of pollution reduction, though all face increasing marginal costs of pollution reduction. The two policies being considered will result in the same amount of pollution reduction
A. only if the equilibrium price in the pollution permit market is $250.
B. never.
C. always.
D. only if the equilibrium price in the pollution permit market is greater than $250.
Answer: A
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Suppose consumer confidence improves and as a result, consumer spending increases by $50 billion dollars. Assume households spend $0.80 of each extra dollar of income and save the remaining $0.20
Other things equal, calculate by how much spending will increase during: a. the first round through the circular flow. b. the second round through the circular flow. c. the third round through the circular flow. d. the fourth round through the circular flow.
If the demand for fast food declines sharply, the marginal revenue product curve for fast food workers will
A. shift to the left. B. shift to the right. C. stay exactly where it is.
Which of the following is an example of bypassing the market through regulation to achieve environmental protection?
A. Privatization. B. Pollution fines. C. Green taxes. D. Command-and-control standards.
Haiti was once a heavily forested country. Today, 80 percent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has lead to devastating floods when it rains heavily
This is an example of A) human greed. B) the consequences of not having a market economic system. C) the tragedy of the commons. D) tragic externalities.