Each citizen in a small town suffers 5 units of irritation for each bushel of leaves burned in the town. The charge for hauling a bushel of leaves to the land fill is a fee equal to 20 units of irritation. There are 25 people in the town, each of whom minimizes personal irritation and has 10 bushels of leaves. If there are no restrictions of any kind on burning leaves and negotiation costs among citizens are prohibitive, what will happen to the leaves in the town?
What will be an ideal response?
All the leaves will be burned, because for each bushel that a person burns, she experiences 5 units of irritation, but if she hauls the leaves she will be charged 20 units of irritation.
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In the late 1990s, M2 velocity ________, suggesting a ________ normal relationship between M2 and macroeconomic variables
A) stabilized; less B) stabilized; more C) slowed; less D) slowed; more
According to the Quantity Theory of Money (Chapter 3), the increase in the money supply from $39.7 billion in 1940 to $99.2 billion in 1945 should have fueled strong inflation. However, it did not because
(a) the World War II (1941–45) (WWII) economy was operating below full employment levels of production. (b) the WWII economy was operating at full employment levels of production. (c) the WWII economy was operating above full employment levels of production. (d) price controls prevented the surge in prices across the economy.
The leverage ratio of an investment firm refers to
a. the ratio of its investment holdings relative to its vault cash. b. the ratio of its investment holdings relative to its capital. c. the percentage of deposits held by the firm relative to its deposits with Federal Reserve banks. d. the percentage of down payments made to the investment firm relative to the size of mortgages issued by the firm.
According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation?
a. an increase in military spending b. a decrease in military spending c. increase in spending by the government on health care d. decrease in federal government taxation of personal income