When a polluter has to bear the full social cost of their actions, they will
A) weigh the costs and benefits of each potential action and might decide to not stop polluting by paying a fine.
B) go out of business since pollution abatement is expensive.
C) will always decide to reduce the amount of pollution by reducing the quantity they produce.
D) increase the price of the product and the quantity produced to pay for the additional costs.
Answer: A
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
The slope of a typical isoquant is negative because to produce a given output, a producer
A) can use less of one input only if the productivity of that input increases B) will use more of one input only if the price of that input falls. C) will use more of one input only if it uses more of another. D) can use less of one input only if it uses more of another.
Looking at the U.S. personal saving rate over the last sixty years, we can say that ________
A) it has always been low B) Americans used to spend a lot more than they have in recent years C) Americans used to save a lot more than they have in recent years D) it has always been fairly high E) Americans spend more when concerned about their future earnings
Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:
a. decreasing tax revenues by $600 billion. b. decreasing government spending by $200 billion. c. increasing tax revenues by $200 billion. d. increasing government purchases by $150 billion.