There are two coal-burning electrical utilities—one in tiny, rural Wanunu, Montana, and another in metropolitan Detroit, Michigan—and each produces the same amount of pollution per unit of output
If a permit tax is going to be used to force these firms to internalize pollution costs, the tax levied should be A) the same in each city.
B) higher in Wanunu than in Detroit.
C) higher in Detroit than in Wanunu.
D) less than zero in each city.
C
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When producers do not have to pay the full cost of producing a product, they tend to
A. underproduce the product because of a positive externality. B. underproduce the product because of a negative externality. C. overproduce the product because of a positive externality. D. overproduce the product because of a negative externality.
Costs that are incurred when people engage in a trade
A) are a waste of resources because they do not create benefits of equal or greater value. B) can be eliminated by substituting government regulation for voluntary exchange. C) reduce the amount of exchange that occurs. D) rise as the number of middlemen increases.
In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as
A) how much good Y you must give up to get one more unit of good X. B) how much good Y you are willing to give up to get one more unit of good X. C) the relative price of good Y in terms of good X. D) how much you prefer to substitute good X for good Y.
What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?
What will be an ideal response?