A firm operates and produces pollution that only harms an individual, Bob. The firm and Bob both know the costs and benefits of reducing pollution. Neither the firm nor Bob acts strategically while bargaining, and there are no transaction costs associated with bargaining. Explain how the efficient level of pollution occurs no matter whether the firm or Bob owns the property right to pollution
What will be an ideal response?
If the firm has the right to pollute, then Bob can bargain with the firm. Bob will pay the firm up to the point where his per unit payment to reduce the pollution equals the marginal benefit he receives from pollution. This will be the efficient level of pollution. If Bob has the right to have no pollution, then the firm will pay to pollute until this cost equals the marginal benefit of a unit of production. This will result in the efficient level of pollution. Thus, no matter which party owns the property right, the efficient level of pollution will result.
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An adverse oil price increase will shift the short-run aggregate supply curve:
A) leftward. B) rightward. C) will not shift. D) none of the above.
The aggregate supply curve (short run):
A. slopes downward and to the right. B. graphs as a vertical line. C. slopes upward and to the right. D. graphs as a horizontal line.
You are in the market for a used 2013 Honda Accord. You know that half of the 2013 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. You are willing to offer ________ for a car of unknown quality and ________ are willing to sell you their car.
A. $2,000; lemon owners only B. $5,000; lemon owners only C. $6,000; lemon owners only D. $8,500; both lemon and peach owners
The fact that business cycles are recurrent but not periodic means that
A. the business cycle's standard contraction-trough-expansion-peak pattern has been observed to occur over and over again, but not at predictable intervals. B. business cycles last a predetermined length of time, but do not all follow a standard contraction-trough-expansion-peak pattern. C. business cycles occur at predictable intervals, but do not all follow a standard contraction-trough-expansion-peak pattern. D. business cycles occur at predictable intervals, but do not last a predetermined length of time.