Suppose that a powerplant is given a permit to pollute 10 tons of carbon into the atmosphere. As the powerplant operates, it can generate $200 of profit selling electricity per ton of carbon that it sends into the atmosphere. If the price of the carbon permit is $100 per ton, then:
A. the powerplant is better off shutting down and selling its permit.
B. the powerplant is better off buying more permits and selling more electricity.
C. the powerplant is better off selling electricity and using the permits to pollute 10 tons of carbon.
D. the powerplant is better off shutting down and buying more permits.
Answer: B
You might also like to view...
The idea that policy actions have no real effects in the short run if they are anticipated and no real effects in the long run is called the
A) adaptive proposition. B) activism proposition. C) Keynesian proposition. D) policy irrelevance proposition.
If you take $500 out of a savings deposit and put it into a checking account, the immediate effect (do not consider the money multiplier):
a. M1 rises, M2 remains the same, and the monetary base remains the same. b. M1 falls, M2 falls, and the monetary base remains the same. c. M1 rises, M2 rises, and the monetary base remains the same. d. M1, M2, and the monetary base rise. e. M1, M2, and the monetary base remain the same.
In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50 . If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?
a. 60 in 1972 and 150 today b. 65 in 1972 and 156 today c. 75 in 1972 and 160 today d. 90 in 1972 and 145.8 today
Given high transactions costs, the best way to deal with a positive externality is
A. to allow both parties to negotiate. B. to limit the extent of the externality. C. to subsidize it. D. to tax it.