To achieve social efficiency, the size of an effluent tax should be based on:
A. the external cost created by the pollutant.
B. people's willingness to pay for a cleaner environment.
C. the expense of installing new "green" equipment.
D. the number of free riders in the industry.
Answer: A
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Suppose milk and chocolate syrup are complements (mixed together they make chocolate milk). If the price of milk increased by exactly 25%, the economic way of thinking suggests
A) the demand for milk would decrease. B) the demand for chocolate syrup would decrease. C) the demand for milk would decrease by exactly 25%. D) the demand for chocolate syrup would decrease by exactly 25%.
The best practices frontier is similar in construction and meaning to the
A) the cost frontier. B) the absolute advantage frontier. C) production possibilities frontier. D) the supply and demand diagram.
If the demand for computers increases as consumers' incomes rise, then computers are:
A. a complementary good. B. a substitute good. C. an inferior good. D. a normal good.
According to the principle of diminishing marginal utility, increases in income will create ______ happiness at ______ income levels.
a. zero; lower b. less; upper c. more; upper d. less; lower