Suppose there are two factories on a river, and both need clean water for their production processes. The upstream factory takes in clean water and dumps dirty water back into the river. The downstream firm must clean up the water it gets from the river before using it. In this situation
A. the internal costs of the upstream factory are externalized by the downstream factory, which then passes them on to its customers.
B. the social costs are greater than the private costs for the upstream firm, while the social costs are less than the private costs for the downstream firm.
C. the private costs of the downstream factory are more than the private costs of the upstream factory, but for both factories private costs and social costs are the same.
D. the upstream factory's private costs are less than its social costs, and its external costs are borne by the downstream factory.
Answer: D
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The existence of multiple federal bank regulatory authorities has been permitted to continue because
A) the regulators coordinate their activities well enough to avoid differences. B) different types of banks require different kinds of regulation. C) many regulatory authorities are necessary to insure the safety of depositor's funds. D) the legislative will to replace the current regulatory system has been lacking.
Recall the Application about how the price of CO2 permits in the European Union is determined to answer the following question(s).Recall the Application. Which of the following factors caused the increase in the price CO2 allowances in the EU in 2017?
A. Members agree on reforms that will increase the supply of allowances. B. Members agree on abolishing the Emissions Trading System (ETS). C. The United States decides to increase its supply of allowances. D. Members agree on reforms that will decrease the supply of allowances.
Suppose two Cournot duopolist firms operate at zero marginal cost. The market demand is p = a - bQ. Firm 1's best-response function is
A) q1 = (a - bq2)/2b. B) q1 = (a - 2bq2)/2b. C) q1 = a/b. D) q1 = a/2b.
Suppose a presidential candidate makes a statement in a debate whereby he promises that he would encourage the Fed to permanently lower the unemployment rate to 3%
His opponent claims that this type of policy idea is mired in the 1960s and would only cause inflation. Explain what the opponent means.