Suppose that the nation wide average cost of air pollution generated by a car is $1,000. Would a tax of $1,000 on every car induce people to take external costs into consideration and bring about the optimal price and output for autos? Explain
What will be an ideal response?
Not necessarily. The $1,000 is an average. Some cars cause more pollution and some less. Cars in Wyoming impose fewer external costs than cars in Los Angeles, and cars that are driven more miles pollute more. A system of pollution fines would be more effective in reducing pollution if the taxes differed depending on the make, with high-polluting cars taxed more, and if part of the tax were on gasoline to reflect cars driven more. We also would want taxes to differ depending on where the car was located.
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Answer the following statement(s) true (T) or false (F)
1. People have rational expectations when their predictions are correct more often than not. 2. Even when econometric equations predict very well, they can be entirely useless as guides to policy. 3. The standard deviation of a portfolio is exactly equal to the average standard deviations of the individual stocks. 4. A risk-averse individual always prefers the basket with the highest standard deviation when choosing among baskets with the same expected value. 5. Uninsurable risks is one reason why fair-odds insurance is not always available.
The figure above shows that monopoly is ________ because it produces a level of output at which ________
A) inefficient; marginal benefit equals marginal cost B) efficient; marginal benefit equals marginal cost C) efficient; marginal benefit exceeds marginal cost D) inefficient; marginal benefit exceeds marginal cost E) efficient; producer surplus is maximized
If the courts apply the rule of reason criterion to a firm that dominates a market but does not engage in anticompetitive behavior, it would not find the firm to be in violation of the antitrust laws
Indicate whether the statement is true or false
Give some explanations for the decline in union membership in the United States.
What will be an ideal response?