What are the benefits of using a pollution tax rather than a command-and-control system to internalize an externality?
What will be an ideal response?
A pollution tax will generate less pollution than a command-and-control policy, since the firm is free to choose either to pay the tax or to come up with a pollution control system that is less costly than the tax. Since firms differ in their production methods, command-and-control policies, which mandate the method of pollution control to the firm, might not be the most efficient method for that firm to use. A pollution tax will also lead to lower prices for the consumers, since the firm can most likely find a cheaper way to control pollution than the method mandated by the government. Finally, a pollution tax generates revenues for the government that might be used to assist with the pollution abatement.
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Which of the following is true of a Nash equilibrium?
A) A game can have only one Nash equilibrium. B) No player can improve his payoff by changing his strategy once in Nash equilibrium. C) A Nash equilibrium cannot occur if each player is aware of the strategies of other players. D) A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses.
Modern Keynesians believe the government should use a policy of laissez faire to address a recession.
Answer the following statement true (T) or false (F)
One advantage of a proprietorship is that
A) it is relatively easy to raise financial capital for a proprietorship. B) a proprietorship is relatively easy to form and to dissolve. C) there are limits to the possible liabilities of the owner. D) depreciation rates on capital are higher.
Even if a market is not competitive, the firms in the market may behave competitively if
A. The market is regulated. B. There are economies of scale. C. Potential competition exists. D. A natural monopoly exists.