Anyone can purchase sulfur dioxide emission allowances on the Chicago Mercantile Exchange. Several environmental groups have raised money to buy allowances (which they subsequently destroy)
As part of their fund-raising, these groups have urged contributors to buy the allowances as gifts. As one newspaper story put it, "For the environmentalist in your life, here's a gift that is sold by the ton, fits in an envelope and will last forever."
Source for quote: Randall Edwards, "Dear Santa: Please Bring Me Sulfur Dioxide for Christmas," Columbus Dispatch, December 19, 1999.
What would be the impact on the price of the emission allowances in the market if more people buy sulfur emission allowances and destroy them?
A) The price falls to zero.
B) The price rises.
C) The price falls but not to zero.
D) The price remains unchanged because the allowances purchased by the environmental groups are destroyed.
B
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The figure above shows the costs and benefits associated with producing paper. What is the efficient level of output?
A) 0 B) 4 tons C) 6 tons D) More than 6 tons E) None of the above answers is correct.
An item has utility for a consumer if it
A) generates enjoyment or satisfaction. B) is scarce. C) is something everyone else wants. D) has a high price.
All of the following involve a moral hazard problem EXCEPT
A) an individual driving carelessly after buying a comprehensive insurance policy for a Ford Pinto. B) the IMF bailing Mexico out of a financial crisis, with promises to do the same for other nations that might face financial problems. C) making regular visits to your doctor because you know that you have full healthcare coverage. D) the requirement of banking institutions that owners invest a substantial portion of their own capital in their bank. E) membership in FDIC (Federal Deposit Insurance Corporation) by your local bank.
Net worth can perform a similar role to
A) diversification. B) collateral. C) intermediation. D) economies of scale.