Assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James gets from each additional pound of steak and chicken: 
Given the above information, what quantities of steak and chicken should James purchase to maximize his utility?
A. 4 steak, 4 chicken
B. 2 steak, 5 chicken
C. 3 steak, 2 chicken
D. 5 steak, 2 chicken
E. none of the above
Answer: A
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a. provide polluters with an incentive to take the marginal social cost of pollution into account. b. are a form of subsidy. c. give consumers an incentive to buy from environmental-friendly firms. d. are a type of transaction cost.
If a negative externality is to be internalized to the decision maker, the:
A. consumer of the good should pay a tax equal to the marginal benefit to those outside the trade that results from consuming the good. B. producers' marginal costs should be reduced by an amount equal to the marginal cost to those outside the trade that results from production of the good. C. producers' marginal costs should be increased by an amount equal to the marginal cost to those outside the trade that results from production of the good. D. consumer of the good should receive a subsidy equal to the marginal cost to those outside the trade that results from production of the good.
Refer to Figure 7.2. Curve A must be MPL and Curve B must be APL because:
A. the two curves intersect at the maximum of Curve A.
B. everywhere that Curve A is positively-sloped, Curve B is positively-sloped as well, and everywhere that Curve A is negatively-sloped, Curve B is negatively-sloped as well.
C. when Curve A lies above Curve B, Curve B is rising, and when Curve A lies below Curve B, Curve B is falling.
D. when Curve B lies above Curve A, Curve A is rising, and when Curve B lies below Curve A, Curve A is falling.