Consider a situation in which the government has limited information about costs and benefits of pollution abatement associated with a given industry
However, it is known that the marginal social cost curve for emissions is much steeper than the marginal cost of abatement curve (in absolute terms). In this situation, which method of emissions control is preferable when the greatest concern is with accuracy of control rather than the cost of control? That is, should a fee be used or should a standard be used? Explain.
In this problem, a standard is preferable to a fee. The reason is that for a given percent error in either method, the fee produces a much bigger social cost. One should note, when information is not complete, standards offer more certainty about emissions levels, but leave the costs of abatement uncertain. Fees offer more certainty about costs, but leave reductions in emissions uncertain.
The relative slopes of the curves are important in determining which method of control yields the greatest variation in possible increase in social cost.
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Interest is considered a(n)
A) explicit cost when the firm pays a bank to borrow money. B) implicit cost when the firm owner uses his or her own funds to buy capital. C) return to entrepreneurship if the firm owner uses her own funds to buy capital. D) form of depreciation if the cost of borrowing increases. E) Both answers A and B are true.
One way to solve the problems caused by information asymmetry is:
A. proofing. B. surfing. C. signaling. D. All of these are solutions to information asymmetry.
A demand curve shows how quantity demanded changes as the price changes. It implies that
a. only a change in price can shift a demand curve b. everything else that affects demand is assumed to be constant c. quantity demanded is unrelated to price d. economists are concerned only with money e. it is impossible to show how anything but price affects demand
Maximum Feasible Hourly Production Rates (in Tons) of EitherKnives or Forks Using All Available ResourcesProductCountry AlphaCountry BetaKnives93Forks612Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then they will trade if the rate of exchange is
A. 5 knives for 1 fork, and Alpha imports forks. B. 0.5 fork for 1 knife, and Beta imports knives. C. 6 forks for 1 knife, and Beta imports knives. D. 0.5 knives for 1 fork, and Alpha imports forks.