Answer the following statement(s) true (T) or false (F)
1. A Pigou tax forces car manufacturers to internalize the cost of pollution.
2. Cap and Trade is so named because the government puts a “cap” on the amount of exports that domestic firms are allowed to “trade” with foreign nations.
3. A Cap and Trade system is more prone to error than a Pigou tax.
4. Pigou taxes are unnecessary in the presence of transaction costs.
5. Pigovian analysis indicates that a subsidy should be awarded when economic activity creates social benefits.
1. True
2. False
3. True
4. False
5. True
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Firms in monopolistic competition always will
A) make an economic profit. B) set their price equal to their marginal cost. C) set their price above their marginal cost. D) produce at the minimum average total cost.
College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers. From this we can conclude that
A) Apple will earn economic profits from the computers it sells to the general public but will break even on the computers it sells to college students and faculty members. B) Apple will charge college students and faculty members lower prices than it charges the general public. C) the general public will earn arbitrage profits by buying iMac desktop computers from Apple and reselling them to college students and faculty members. D) Apple will charge college students and faculty members higher prices than it charges the general public.
Suppose that the price of chicken rises sharply compared to the price of turkey. In response, consumers buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to ________ inflation as a result of ________ bias.
A. overstate; quality adjustment B. accurately measure; substitution C. overstate; substitution D. understate; substitution
If nations trade on the basis of comparative advantage
A. a nation can gain only at the expense of trading partners. B. exporting nations gain and importing nations lose. C. importing nations gain and exporting nations lose. D. all trading partners mutually gain.