Table 28.1Reduction in Emissions (in tons)MC to Reduce Emissions by Steel PlantMC to Reduce Emissions by Paper Plant1$400$20025002803600320Refer to Table 28.1. Suppose the government allows these two firms to trade pollution permits. The most efficient transaction would result in
A. An increase in emissions by the steel plant and a reduction by the paper plant.
B. A decrease in emissions by both plants.
C. A reduction in emissions by the paper plant and no change for the steel plant.
D. An increase in emissions by both plants.
Answer: C
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The slope of the production possibilities curve is
A) positive and increasing. B) the opportunity cost of one good in terms of the other. C) positive and decreasing. D) positive.
The more substitutes available for a product, the
A) larger is its price elasticity of demand. B) smaller is its income elasticity of demand. C) smaller is its price elasticity of demand. D) larger is its income elasticity of demand.
What is a problem with command-and-control policies?
a. It provides too much flexibility for firms to determine the best way to reduce their pollution. b. There are strong incentives to lower costs of reducing pollution. c. It is not the most efficient method for reducing pollution. d. There is strong agreement as to what are the correct policies.
The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university can only charge a single price and wishes to maximize the total number of seats purchased during the day, it should set the price
A) at equilibrium for 8 a.m. classes. B) at equilibrium for 10 a.m. classes. C) midway between the two equilibria. D) below either 8 a.m. or 10 a.m. equilibrium price.