The marginal social costs and abatement costs of a certain type of air pollution for a factory are given as:
MSC = -1121 + 22.5Q MCA = 879 - 17.5Q,
where Q = units of pollution per day, and MSC and MCA are measured in dollars. The factory is located in a small town that is currently setting community standards. You have been hired to perform the analysis requested below.
a. If the community wishes to set a pollution standard for the factory, what daily level of pollution should be allowed?
b. As an alternative, some members of the town council favor an emissions tax for the factory. If a tax is implemented, at what level should the tax be set?
a.
To determine the optimal level of pollution, we equate MSC to MCA
-1121 + 22.5Q = 879 - 17.5Q
-2,000 = -40Q
Q = 50
50 units of pollution is optimal.
b.
To determine tax, examine MSC or MCA at optimal level.
MCA = 879 - 17.5(50 )
MCA = 4
set tax = MCA = MSC = 4.
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A. D; C B. B; C C. B; A D. D; B
The aggregate production function is graphed as
A) a downward sloping curve. B) an upward sloping straight line. C) an upward sloping line that becomes flatter as the quantity of labor increases. D) an upward sloping line that becomes steeper as the quantity of labor increases.
Answer the following statement true (T) or false (F)
1) The principal-agent problem in labor markets arises because of the possibility of shirking by workers. 2) Efficiency wages are established at below-equilibrium levels. 3) Human capital investment refers to spending on education and worker training. 4) Noncompeting groups of workers are the result of geographic immobilities. 5) Shirking refers to the behavior of workers who provide less-than-expected effort on the job.
The process of making the best of our limited resources by doing the things we are best at and hiring other people to do the things we are not particularly good at is called
A) absolute advantage. B) comparative advantage. C) specialization. D) protectionism.