SouthState Chemical Co produces pine oil cleaners in a process that produces emissions that discolor the paint on nearby houses, although the emissions have been declared nontoxic to humans
a. Is the price for the cleaner likely to be allocatively efficient? Use a graphic illustration in your answer.
b. If your answer to (a) is no, what is an appropriate government policy to correct the problem?
a. No, the price for the cleaner is too low; marginal social cost is greater than marginal private cost. The graphic illustration should resemble Figure 15-2 in the text.
b. The chemical company might be taxed to the extent of the damages sustained by homeowners to raise the marginal private cost to equal marginal social cost.
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An increase in unemployment benefits ________ and an increase in international competition that changes the location of jobs ________
A) increases frictional unemployment; increases structural unemployment B) increases structural unemployment; decreases frictional unemployment C) decreases cyclical unemployment; decreases cyclical unemployment D) decreases cyclical unemployment; increases cyclical unemployment E) decreases structural unemployment; decreases cyclical unemployment
Which kind of risk affects the opportunity cost of capital?
A) Nondiversifiable risk B) Diversifiable risk C) Both nondiversifiable and diversifiable risk D) The risk inherent in "riskless" assets such as U.S. Treasury bills E) The risk inherent in "riskless" portfolios such as broad stock market holdings
Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1 . A Japanese firm purchasing this machine would pay
a. 100 yen b. 500 yen c. 5,000 yen d. 10,000 yen e. 50,000 yen
Factors that prevent the Coase Theorem from working include all of the following, except:
A. private property rights. B. transaction costs. C. income effects. D. more than two individuals affected.