An effluent fee is a
A. charge for a public good.
B. charge to a polluter that gives the right to discharge pollution into the air.
C. fine imposed on a polluter for dumping illegal pollution.
D. subsidy given to the producer of a positive externality.
Answer: B
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The Ricardian equivalence theorem implies that
A) government debt policy must be handled correctly for the economy to prosper. B) the amounts of government spending are neutral. C) an increase in government spending has no effect on the economy, as long as there is an equal change in taxes. D) the timing of taxes collected by the government is neutral.
The fact that resources tend to be specialized is one reason the production possibilities frontier is drawn
a. bowed outward. b. bowed inward. c. as a straight line (but not horizontal). d. as a horizontal straight line.
Consumers' surplus is the difference between the price
A) sellers receive for a good and the maximum price they would have paid for the good. B) sellers receive for a good and the minimum price for which they could have sold the good. C) buyers pay for a good and the maximum price they would have paid for the good. D) buyers pay for a good and the minimum price for which they would have sold the good.
Which best describes the "invisible hand" concept?
A. The market system works best when resources are highly substitutable. B. The problem of scarcity can best be overcome in a system of mixed capitalism. C. Highly detailed central direction of an economy will maximize the public's best interests. D. The desires of producers and resource suppliers to further their own self-interest will tend to promote the social interest.