Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains and losses (in thousands of dollars) for the three parties are listed below. WithFilterWithoutFilterGains to Erie$200$400Fisherman$180$50Bird Watchers$130$25The cost (in thousands of dollars) of the filter to Erie Textiles is ________, and the net benefit (in thousands of dollars) of the filter to the fishermen and bird watchers is ________.
A. $200; $75
B. $200; $235
C. $310; $200
D. $400; $310
Answer: B
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Research confirms that government provision of infrastructure:
A. promotes economic growth. B. increases human capital. C. leads to reduced spending on research and development. D. hinders economic growth.
If a firm has established monitoring devices that have a 50% chance of detecting shirking, and an employee gains $5,000 from shirking, the employer can deter shirking by having employees post a bond equal to
A) $2,500. B) $5,000. C) $10,000. D) $50,000.
The invisible hand is closely related to each of the following, except
A. supply and demand. B. the price mechanism. C. competition. D. fairness or equity.
Balancing the federal budget over the business cycle requires
A. deficits incurred during economic slumps that are offset by surpluses during economic booms. B. raising taxes and cutting spending during stagflation. C. rapid increases in the national debt during national emergencies. D. matching deficits and surpluses each time Earth orbits the sun. E. that the national debt grow only as fast as GDP grows.