This figure shows the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive.
If Sarah and Joe are working on a project together and faced with the choices outlined in the figure shown, we can predict the outcome will be that:
A. both Joe and Sarah put forth low effort.
B. Joe will put forth high effort, and Sarah will put forth low effort.
C. Joe will put forth low effort, and Sarah will put forth high effort.
D. both Joe and Sarah put forth high effort.
A. both Joe and Sarah put forth low effort.
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Suppose that the current price of a marketable permit to emit one ton of gunk is $60 . For firm A, the marginal cost of reducing one ton of gunk is $50 . For firm B, the marginal cost of reducing one ton of gunk is $70 . Under a marketable permit system, _____
a. both firms will buy a permit and emit one more ton of gunk b. firm A will buy a permit and emit one more ton of gunk, whereas firm B will reduce its emissions of gunk by one ton c. firm B will buy a permit and emit one more ton of gunk, whereas firm A will reduce its emissions of gunk by one ton d. both firms will reduce their emissions of gunk by one ton e. both firms will go out of business
The aggregate demand (AD) curve shifts to the right. This is a result of
A) total expenditures increasing at a given price level. B) total expenditures decreasing at a given price level. C) the real balance effect. D) the interest rate effect E) b and c
The Coase theorem will apply only if
A. the courts can be used to determine the amount of compensation that must be made to the damaged party. B. the number of people involved is small. C. the amount of compensation that must be made to the damaged party is small. D. an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
If the Reserve Bank of Australia's policy is described as contractionary, then it would
A. reduce the overnight cash rate. B. use open market operations to sell financial securities. C. increase the level of liquidity in the financial market. D. use open market operations to buy financial securities.