Refer to the information in Figure 16.5 below to answer the question(s) that follow.
?Figure 16.5Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.Refer to Figure 16.5. Suppose that instead of a tax, the government uses standards to achieve the emission reductions, requiring that each company cut its original emissions in half rather than allowing each company to choose emissions based on their costs. Compared to the outcome under the tax, this common standard would
result in
A. Alpha gaining less than Beta loses.
B. Beta gaining less than Alpha loses.
C. Alpha gaining more than Beta loses.
D. Beta gaining more than Alpha loses.
Answer: A
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According to the Taylor rule, the Federal Reserve sets interest rates in response to:
A. the inflation rate and the current output gap. B. the inflation rate and the unemployment rate. C. the current output gap and the target money supply growth. D. the S&P 500 index and the inflation rate.
Which one of the following statements is NOT true?
A) The classical model assumes that people suffer from money illusion. B) The classical model assumes that no single seller of a commodity can affect its price. C) The classical model assumes that pure competition exists. D) The classical model assumes that people are motivated by self-interest.
Why is the long-run average total cost (LRATC) curve called the planning curve?
When nominal interest rates are held below inflation rates, then households will have an incentive to
a. consume. b. save. c. purchase financial assets. d. postpone current consumption plans.