Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200 . Suppose that the railroad is not liable for any
damage caused to the crops. Assume that there are no transaction costs. Which of the following characterizes an efficient outcome?
a. The railroad will continue to operate but will pay the farmer $1,500 in damages.
b. The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur.
c. The farmer will incur $1,500 in damages to his crops.
d. The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.
d
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Which of the following statements best describes the study of economics? Economics studies how
A) to organize production so that scarcity does not occur. B) firms make profits. C) we make choices in the face of scarcity. D) to create incentives so that scarcity does not exist. E) businesses reach decisions.
Refer to Figure 17-2. At which point is the unemployment rate equal to the natural rate of unemployment?
A) A B) B C) C D) There is insufficient information on the graph to answer this question.
This table shows the different combinations of goods that Jack can consume, given that his income to spend on these two items is $10.
Considering the information in the table shown, the bundle of goods that will derive the highest total utility for Jack is:
A. E.
B. B.
C. C.
D. D.
Of the following examples, the sales for ______ will most likely be affected by the health of the economy.
a. drain cleaner b. towels c. dishwashing liquid d. popcorn