Explain how any cap-and-trade system can be made to be equivalent to a pollution tax and vice versa.
What will be an ideal response?
A pollution tax directly sets a price for emitting pollution -- and then the market determines the quantity of pollution that will be emitted. A cap-and-trade system sets the quantity of pollution that will be emitted and then lets the (pollution permit) market determine the price. If the pollution tax is set at the price that emerges under a cap-and-trade system, the quantity of pollution emitted under the pollution tax would be the same as under the cap-and-trade system. If, on the other hand, the cap in a cap-and-trade system is set at the quantity level that emerges from a given pollution tax, the price for pollution permits will emerge to be the same as the pollution tax.
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When one person's opportunity cost of producing a good is lower than another person's opportunity cost of producing the same good, it is called
A) an absolute advantage. B) a comparative advantage. C) specialization. D) production possibilities. E) a trade-off.
At each round of the multiplier process, increases in income:
a. leak out of the expenditures stream in the form of investment and taxes. b. leak out of the expenditures stream in the form of saving and imports. c. are matched by a smaller increase in expenditures. d. result in even greater increases in expenditures due to investment and exports. e. result in no change in total expenditures.
How does the United States compare to other advanced, industrialized economies on the issue of openness?
a. It is completely closed. b. It is one of the less open of them. c. It is about average in openness. d. It is one of the more open of them. e. It is the most open of them.
Economists would classify all of the following as land except:
a. Iron ore deposits b. A hydroelectric dam c. Two thousand acres of virgin forest d. Crude oil reserves