Answer the following statements true (T) or false (F)
1. Production subsidies are a way of internalizing external costs among polluting firms.
2. In dealing with market failures, the government always bases its decisions on economic analysis of marginal cost and marginal benefit.
3. An effective antipollution policy from the economic perspective requires that all pollution be eliminated and banned.
4. Because in any period of time and in any region the quantity of pollutants that can be absorbed by nature is fixed, the supply of "pollution rights" in a cap-and-trade system will be perfectly elastic.
1. FALSE
2. FALSE
3. FALSE
4. FALSE
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Consider the same monopoly situation as in the previous question. The deadweight loss (compared to a single firm behaving as if it were perfectly competitive) is about
a. 667 b. 333 c. 1,000 d. 1,333
As a result of the tax, consumption of this good will decline by
A. 5 units.
B. 10 units.
C. 15 units.
D. quantity consumed will not decline at all.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, measured in terms of hybrid cars
A. remains constant. B. decreases. C. initially increases, then decreases. D. increases.
The phrase "don't cry over spilt milk" could be rephrased in economic terms by saying:
A. "Sunk costs are irrelevant to a decision." B. "Real resources have opportunity costs." C. "There are economies and diseconomies of scale." D. "The law of diminishing returns applies to everything."