During the production process Ajax Corporation releases pollution into the air. Ajax Corporation operates in a monopolistic competitive industry. Which of the following statements addresses the pollution situation?
A. This is an example of a market failure and is a reason for the government to regulate the industry.
B. This is known as the lemons problem.
C. Ajax is taking advantage of asymmetric information.
D. The quality of the product could be improved if the amount of pollution can be reduced.
Answer: A
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What is the efficient outcome in this case if her neighbor values keeping his pet free for $1,500?
Discretionary fiscal policy is:
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A. unskilled-labor-intensive; decreased B. capital and skill-intensive; increased C. capital and skill-intensive; decreased D. unskilled-labor-intensive; increased
Suppose that you lend $5,000 to a friend who pays you back $5,400 the next year. Suppose that prices that year rose by six percent and the real rate of return in the stock market was five percent. Your friend says that he or she was being more than fair by giving you more than the rate of inflation as a return. What do you think?
What will be an ideal response?