How does the selling of pollution rights lead to a more efficient outcome?
What will be an ideal response?
The right to pollute is often beneficial to those who pollute. Firms will try to maximize profit by limiting their costs of production. Those firms who can limit pollution cheaply will not opt to purchase pollution permits, while those that face high costs to limit pollution will. Therefore, as long as firms weigh the benefits and costs of polluting (purchasing permits), the amount of pollution will be reduced to an efficient level.
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When tastes over current and future consumption are characterized by Cobb-Douglas utility functions, a borrower who has no income now and all income in the future will borrow more when the interest rate falls.
Answer the following statement true (T) or false (F)
If individual X has comparative advantage in painting and individual Y has comparative advantage in carpentry, then
A) individual X must use fewer hours to paint a fence than individual Y. B) individual Y will specialize in painting. C) there is a lower opportunity cost (expressed in units of carpentry) for individual X to paint than for individual Y to paint. D) specialization will not occur, since each does not have a clear absolute advantage.
Assume the total product of three workers is 120 and the total product of four workers is 160. The average product of four workers is ________, and the marginal product of the fourth worker is ________.
A. 40; 40 B. 10; 40 C. 30; 10 D. 160; 40
If demand is highly inelastic and supply shifts to the right, the equilibrium price will rise significantly while quantity will increase only slightly.
Answer the following statement true (T) or false (F)