Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $75,000. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted. Suppose the law guarantees the farmer access to clean water from the river. Which of the following describes an efficient outcome in this case?
A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river.
B. The owner of the mill pays the farmer $87,500 for his permission to pollute the river.
C. The owner of the mill pays the farmer $112,500 for his permission to pollute the river.
D. The farmer pays the owner of the mill $87,500 to stop polluting.
A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river.
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Total utility describes
A) the benefit gained from all consumption. B) an increase in consumption multiplied by the gain in utility. C) total consumption multiplied by marginal utility. D) total consumption divided by marginal utility.
The decision-making process followed by consumers to maximize utility assumes that
A. consumers have unlimited incomes. B. consumers behave rationally, attempting to maximize their satisfaction. C. consumers are unable to rank their preferences. D. consumers do not know how much marginal utility they obtain from consuming additional units of various products.
Explain how a reduction in the proportion of contracts that are indexed affects the relationship between changes in the unemployment rate and inflation
What will be an ideal response?
Last year there were 6 pizza shops in town. This year there are only 4. Other things being equal, the decrease in the number of suppliers will
A) cause the market supply curve to shift to the right. B) increase the market demand for pizza. C) cause a decrease in the quantity supplied at each price. D) have no impact on market supply as long as the demand for pizza remains strong.