An appropriate government policy toward negative externalities is to
A. subsidize the activity that creates the negative externality.
B. impose a tax or fine on the activity that creates the negative externality.
C. pay money to the party that creates the negative externality.
D. impose a tax on recipients of the negative externality.
Answer: B
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A labor contract provides for a first-year wage of $10 per hour, and specifies that the real wage will rise by 3 percent in the second year of the contract. The CPI is 1.00 in the first year and 1.07 in the second year. What dollar wage must be paid in the second year?
A. $10.90 B. $10.70 C. $11.02 D. $10.30
In the above figure, a price of $1.25 and a quantity of 5 million gallons of milk per day maximizes the
A) amount of consumer surplus. B) amount of producer surplus. C) sum of consumer surplus and producer surplus. D) All of the above answers are correct.
Refer to Figure 17-5. Consider the Phillips curves shown in the above graph. We can conclude from this graph that
A) the expected rate of inflation in this economy is 10 percent. B) ceteris paribus, a fall in the rate of inflation to 5 percent will increase unemployment to 7.5 percent in the short run. C) the natural rate of unemployment in this economy is 5.5 percent. D) All of the above are correct.
In the median voter model, we assume that
A) voters will vote for the friendlier of two candidates. B) voters will vote for the candidate who comes closer to matching their views. C) the candidate who occupies the far right has a better chance of winning the election than the candidate who occupies the far left. D) there are three candidates running for the same office. E) b and c