The table above describes the market for paper. The production of paper produces pollution. There are no external benefits. What is the quantity produced if the market for paper is unregulated?
A) 10 tons per week
B) 60 tons per week
C) 40 tons per week
D) 30 tons per week
B
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The productivity curve shifts upward when
A) technology advances. B) physical capital increases. C) hours of labor increase. D) hours of labor decrease. E) human capital decreases.
The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the
A) Friedman-Lucas theory. B) permanent income hypothesis. C) Ricardian equivalence theorem. D) intertemporal substitution effect.
Social Security pension benefits are
A. subject to income taxes for those with certain income levels. B. non-taxable for all retirees. C. subject to state, but not federal, income taxes. D. subject to capital gains taxes.
Refer to Scenario 17.3. Moral hazard arises in this situation because once the firm
A) pays the premium that is based on the 0.001 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.001. B) pays the premium that is based on the 0.01 probability, it has no incentive to spend the additional $80 for the fire protection program, so the true probability of loss is no longer 0.01. C) puts the fire protection program in place, it has less incentive to spend $300 for a premium, leaving the firm underinsured. D) puts the fire protection program in place, it has less incentive to spend $6,000 for a premium, leaving the firm underinsured. E) puts the fire protection program in place, it will consider that a substitute for insurance and not be able to deal with the loss from a fire should it occur.