Consider a factory that emits chemicals into a river, thus polluting the water supply of a downstream community. The Coase Theorem states that the socially optimal, or efficient, solution can be achieved by assigning property rights to _____________________.
a. the company.
b. the community.
c. the company and the community, jointly.
d. the company or the community.
e. a government regulator.
Answer: d. the company or the community.
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When aggregate planned expenditure is less than GDP,
A) the economy definitely is at its equilibrium expenditure but even so, firms decrease production. B) firms increase production until the economy reaches equilibrium expenditure. C) the economy definitely is at its equilibrium expenditure and firms do not change production. D) firms decrease production until the economy reaches equilibrium expenditure. E) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.
A tax can always be found and implemented that will correct a cause of an external effect
Indicate whether the statement is true or false
As long as firms currently in a monopolistically competitive market are earning profits:
A. more firms will leave the market before the profits are competed away. B. the government will step in to regulate prices to ensure they stay competitive. C. the firm will lower its price to keep out competitors. D. more firms will enter the market with products that are close substitutes.
If the demand curve is perfectly elastic, the elasticity coefficient is ____ and the curve is ____
a. zero, vertical b. infinity, horizontal c. zero, horizontal d. infinity, vertical