Suppose that there are two firms, each generating three tons of SO2. Suppose also that the government has set a target abatement level of two tons. Under a policy of uniform abatement with permits, each firm would receive:
A. two non-transferable pollution permits.
B. two pollution permits which they could sell to each other.
C. one pollution permit with a value equal to that firm's cost of abating one ton of SO2.
D. one pollution permit with a value equal to the market price for a pollution permit.
Answer: A
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Answer the following statements true (T) or false (F)
1. The demand for necessities and goods that require a small expenditure tends to be price inelastic. 2. If total revenue decreases when a price is decreased, the demand for the commodity is elastic. 3. If the coefficient of elasticity for a commodity is 1.5 and the price of that commodity is raised, total revenue will decrease. 4. The slope of a demand curve is a measure of elasticity. 5. The demand for a fur coat tends to be more price elastic than the demand for automobile tires.
For economists, historical episodes
a. are not worthy of study because they offer few insights into current economic events and problems. b. are not worthy of study because laboratory experiments provide more reliable data. c. are worthy of study because economists rely entirely on observation, rather than on theory. d. are worthy of study because they serve as valuable substitutes for laboratory experiments.
What are the accurate coordinates of the old equilibrium price?
a. P1; Q2
b. P1 Q1
c. P2; Q1
d. P2; Q2
In a perfectly competitive industry, price is set by ___________ and ___________.
Fill in the blank(s) with the appropriate word(s).