The factor that leads to underpricing and overuse of an economic resource is
a. human greed and selfishness.
b. capital markets.
c. the lack of an enforceable property right.
d. the lack of understanding of pollution and its effects.
c
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If the expected path of 1-year interest rates over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and 5 percent, the expectations theory predicts that the bond with the highest interest rate today is the one with a maturity of
A) two years. B) three years. C) four years. D) five years.
An increase in autonomous spending is sure to reduce the real money supply when
A) the economy is in the liquidity trap. B) the IS curve is vertical. C) the economy is at full employment. D) velocity is constant.
Jane wins $100,000 in a lottery and immediately uses her winnings to open up a donuts shop. Her direct cost is $50,000 . and she puts the remaining money in a savings account earning 10 percent annual interest. Alternatively, Jane could have placed all her lottery winnings in the 10 percent savings account. Jane's total cost of opening up a donuts shop is:
a. $60,000. b. $50,000. c. $160,000. d. $45,000. e. $55,000.
If the U.S. interest rate is 4% per year and the U.K. interest rate is 9% per year, then:
a. an investor will see no reason to invest in the United Kingdom. b. an investor will borrow money in the United Kingdom and invest it in the United States. c. an investor can borrow money in the United States and invest it in the United Kingdom and profit. d. an investor will find that the returns are the same in both countries.