If water quality law prevents the achievement of the efficiency criterion
a. that law must be repealed
b. a “second-best” economic solution is to identify cost-effective policy initiatives
c. cost-effectiveness is also prevented
d. polluting sources should abate up to the point where total social benefits are maximized
b. a “second-best” economic solution is to identify cost-effective policy initiatives
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Answer the following statement(s) true (T) or false (F)
1. In the principal-agent problem, assigning full liability to the agent gives no incentive for the principal to avoid damages. 2. Transaction costs arise when property rights are nonexistent. 3. If all parties can enter into negotiations, social optimum is achieved with or without a Pigou tax. 4. A free-rider problem occurs when people can share in the benefits of an activity without being forced to contribute to its costs. 5. Court decision involving torts are irrelevant to social welfare.
Jeremiah spends all of his income on oranges and cookies, which are normal goods. If Jeremiah's income decreases, he will buy ________ oranges and ________ cookies
His marginal utility from oranges will ________ and his marginal utility from cookies will ________. A) fewer; fewer; decrease; increase B) more; more; decrease; decrease C) the same quantity of; fewer; remain constant; decrease D) fewer; fewer; increase; increase
International trade
A) accounts for more than 90 percent of world economic activity. B) is a relatively small (about 30 percent of world output) but growing part of world economic activity. C) has been growing at about the same rate as the world economy. D) Both A and C.
Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds) are based on the premise that
A) the returns to stocks are higher than the returns to bonds. B) the returns to stocks aren't as risky as the returns to bonds. C) the transactions costs for investing in stocks are lower than the transactions costs for investing in bonds. D) stocks are more liquid than bonds.