Damages from air pollution include adverse effects on human health and ecosystems, and reduced visibility. The first few units of pollution cause relatively little damage because ecosystems can process and break down a certain amount of pollution, and the levels are generally too low to have significant health impacts. Eventually, levels become high enough to start causing damage such as asthma, noticeable reductions in visibility, and ecological degradation. A small amount of automobile exhaust on a clear day may be a minor annoyance, but the same amount added to a smoggy area at rush hour could trigger significant breathing and health problems. Thus the marginal external damages of pollution, MEDP, start off ___________________.
a. small and grow as the level of pollution rises.
b. large and shrink as the level of pollution rises.
c. large and shrink as the level of pollution falls.
d. small and grow as the level of pollution falls.
e. None of the above.
Answer: a. small and grow as the level of pollution rises.
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Refer to Figure 15-4. What is the price charged for the profit-maximizing output level?
A) $13 B) $21 C) $27 D) $34
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A) output B) potential output C) expected inflation D) price shocks E) all of the above
If pretzels are a normal good, the income effect of a price change means that
a. as income increases, the quantity demanded increases along the demand curve for pretzels b. as income increases, the demand curve for pretzels shifts rightward c. as income increases, the demand curve for pretzels shifts leftward d. as the price of pretzels increases, the real income of individuals who demand pretzels decreases, so the quantity demanded of pretzels decreases e. as the price of pretzels increases, income increases