Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted.ProcessABCDE(smoke/day)(4 tons/day)(3 tons/day)(2 tons/day)(1 tons/day)(0 tons/day)Cost to Industrio ($/day)$350$400$500$700$1,000Cost to Capitalista ($/day)$225$250$290$400$600 If
neither firm had any permits, Industrio would be willing to pay up to ________ for the right to emit 1 ton of smoke, and Capitalista would be willing to pay up to ________ for the right to emit 1 ton of smoke.
A. $50; $25
B. $50; $50
C. $1000; $600
D. $300; $200
Answer: D
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A bank faced with the wholesale loss of deposits is likely to shut down despite fundamentally sound balance sheet. Why could this be?
A) Banks have accountants that are too optimistic. B) Banks purposely lie about their balance sheets in order to attract more clients. C) Many bank assets are illiquid and cannot be sold quickly to meet deposit obligations without substantial loss to the bank. D) Many banks operate on a budget that exceeds their actual reserves. E) Many banks will shut down to preserve their interest profits.
The marginal productivity theory of distribution holds that
a. each factor is paid what it deserves. b. the owner of each factor is paid the amount that the factor contributes to earnings. c. each factor's income depends on how hard it works. d. each factor receives an equal share of the revenue from production.
Other things the same, continued losses in technological ability and continued decreases in the money supply would unambiguously lead to
a) neither declining prices nor declining real GDP. b) declining real GDP only. c) declining prices only. d) declining prices and declining real GDP.
A supply-side policy to cure a recession might include
A. A decrease in government spending. B. A decrease in the reserve requirement. C. A tax increase. D. Tax incentives for students and entrepreneurs.