The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output, and the marginal cost to the surrounding neighbors. The marginal cost of production is zero for the firm
According to Coase's Theorem, which of the following scenarios is most likely to lead to the socially optimal level of pollution? A) The firm owns the river and there are a thousand surrounding neighbors.
B) The firm owns the river and there is just one nearby neighbor.
C) The river is jointly owned by one thousand surrounding neighbors.
D) The firm owns the river, and therefore produces the social optimum no matter what.
B
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Which of the following is not an example of moral hazard?
a. People with health insurance take poor care of themselves. b. Reckless drivers own the safest cars. c. Banks make risky loans because deposit insurance protects them. d. People give more to charity just because it is tax deductible. e. A quarterback holds on to the ball longer before passing because he has a good offensive line.
Trade, whether between individuals or nations, will not take place unless
A. there is one commodity and one currency. B. at least one participant expects to gain from the trade. C. both participants expect to gain from the trade. D. each side has an absolute advantage.
A theory of fairness that holds that taxpayers should contribute to the government in ________ the benefits they receive from public expenditures is the benefits-received principle.
A. a greater proportion than B. proportion to C. a smaller proportion than D. The benefits-received principle does not equate taxpayer contributions to the government and benefits received from public expenditure.
What is the difference between capital-using and capital-saving technological advances? Give examples.
What will be an ideal response?