Suppose the U.S. government imposes a requirement that all passenger cars achieve a minimum fuel economy of 25 miles per gallon combined fuel efficiency. What impact would this have on the price of gasoline? What impact do you think this would have on deaths from traffic accidents?
What will be an ideal response?
As the demand for gasoline declined, the price of gasoline would fall. As car manufacturers sought to increase fuel economy, cars might become lighter and therefore less crashworthy. Deaths from traffic accidents would probably increase.
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A person is risk averse if:
A. his indifference curve is tangent to the constant expected consumption line at a point on the guaranteed consumption line. B. he views variability as a bad thing. C. for a given level of expected consumption, he prefers the riskless bundle to a risky one. D. All of these answer choices are correct.
Refer to Figure 9.8. A $50 tariff would result in domestic consumption of
A) 600, domestic production of 100, and imports of 500. B) 500, domestic production of 200, and imports of 300. C) 400, domestic production of 300, and imports of 100. D) 300, domestic production of 400, and exports of 100. E) 200, domestic production of 500, and exports of 300.
According to the above figure, if steel mills are charged an effluent fee in order to bear the cost of pollution, what happens to the equilibrium price and equilibrium quantity?
A) They are unchanged. B) They change from P1 and Q1 to P2 and Q2. C) They change from P2 and Q2 to P1 and Q1. D) The equilibrium price increases from P1 and P2, but the equilibrium quantity is unchanged.
Just like a monopolist, a monopolistically competitive firm:
A. cannot sell additional units of output without lowering the price. B. is a price taker. C. sets the price according to marginal revenue and marginal cost; the demand curve doesn't matter. D. faces a perfectly elastic demand curve.