It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment.
A. external cost resulting from the production of hydroelectric power.
B. underproduction of paper in the mills.
C. overproduction of paper in the mills.
D. overproduction of power by the hydroelectric plants.
Answer: C. overproduction of paper in the mills.
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Investment spending will decrease when
A) firms become more optimistic about earning future profits. B) the corporate income tax decreases. C) business cash flow decreases. D) the interest rate falls.
Two-period panel data is used for program evaluation and policy analysis.
Answer the following statement true (T) or false (F)
When measuring the risk of an asset:
A. one cannot use other investments to evaluate the asset's risk. B. it is necessary to incorporate uncertainties that are not quantifiable. C. one must remember that the concept of risk applies only to financial markets, not to financial intermediaries. D. one must measure the uncertainty about the size of future payoffs.
An absolute price elasticity of demand equal to 2 indicates that a
A. 1 percent increase in price leads to a 2 percent decrease in quantity demanded. B. 10 percent decrease in price leads to a 2 percent increase in quantity demanded. C. 2 percent increase in price leads to a 10 percent decrease in quantity demanded. D. 0.2 percent decrease in price leads to a 1 percent increase in quantity demanded.