Suppose that there are two firms, each generating three tons of SO2. Suppose also that the government has set a target abatement level of two tons. Under a policy of uniform abatement with permits, the firm with the lower marginal abatement cost:
A. will abate exactly the same amount of SO2 as the firm with the higher marginal abatement cost.
B. will abate less SO2 than the firm with the higher marginal abatement cost.
C. will abate more SO2 than the firm with the higher marginal abatement cost.
D. will sell its pollution permit to the firm with the higher marginal abatement cost.
Answer: A
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In the model of perfect competition, firms produce a
A) standardized product with considerable control over price. B) differentiated product with no control over price. C) differentiated product with considerable control over price. D). all of the above. E). none of the above.
Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a
A. negative externality. B. positive externality. C. substitute good. D. complementary good.
Moral hazard is a problem in providing deposit insurance because insured banks are
A) more likely to make bookkeeping errors. B) overly cautious due to extra regulations adopted by the FDIC. C) more likely to provide bank managers with lavish perquisites. D) encouraged to take on more risk.
Refer to the information provided in Figure 7.3 below to answer the question(s) that follow. 
Figure 7.3Refer to Figure 7.3. The marginal product of the first worker is ________ yards raked.
A. 10 B. 13.5 C. 17 D. 27