Which of the following statements is true?
A. Emissions-trading is trading that allows firms to buy and sell the right to pollute.
B. The Coase Theorem is the proposition that private markets can rarely ever achieve social efficiency.
C. The free-rider problem refers to those who ride on public transit systems without paying.
D. Government failure has never occurred in the United States.
Answer: A
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Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential
If a 5 percent decrease in income leads to a 15 percent decrease in the demand for a good, the income elasticity of demand equals
A) -1/3 and the good is an inferior good. B) 1/3 and demand for the good is income elastic. C) 3 and the good is a normal good. D) -3 and the demand for the good is income inelastic. E) 3 and the good is an inferior good.
Which of the following statements is true?
A) Optimization requires individuals to foresee the future perfectly. B) An optimizing individual need not consider the risks involved in various choices. C) An optimizing individual is also likely to exhibit rationality. D) The less information that is available, the easier it is to make optimal decisions.
Under laissez-faire, society’s decisions about how much of every product to produce depend on
A. consumer preferences only. B. production costs only. C. consumer preferences and production costs. D. neither consumer preferences nor production costs.