Rationing through the price system
A. leads to an efficient use of available resources.
B. leads to high prices.
C. leads to an inefficient use of available resources.
D. works only with government interference.
Answer: A
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Suppose that a government agency is trying to decide between two pollution reduction policy options. Under the permit option, 100 pollution permits would be sold, each allowing emission of one unit of pollution. Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit. Under the pollution tax option, firms would be taxed $250 for each unit of pollution emitted. The regulated firms all currently pollute and face varying costs of pollution reduction, though all face increasing marginal costs of pollution reduction. Because firms face increasing marginal costs to reduce pollution, the demand curve for pollution permits will be:
A. downward sloping. B. perfectly inelastic. C. upward sloping. D. perfectly elastic.
The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:
a. PxX + PyY = B. b. PxX + PyY = 1 / B. c. PxX = B + PyY. d. PxX / PyY = 1 ? B.
With the resources it has, an economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the frontier
a. True b. False Indicate whether the statement is true or false
Over-the-counter (OTC) markets:
A. are centralized exchanges but you must be a dealer to be part of an exchange. B. only deal in the stocks of companies with over $100 million in capital. C. employ specialists to minimize price volatility. D. are networks of security dealers linked electronically.