Some environmentalists have criticized tradable emission allowances on the grounds that they give permit holders a license to pollute. Furthermore, environmentalists argue that those who sell their permits receive a monetary benefit from their
contribution to polluting the environment. Use economic reasoning to evaluate this criticism.
What will be an ideal response?
The criticism ignores one of the central lessons of economics: resources are scarce and trade-offs exist. Resources spent reducing one type of pollution are not available for other uses. Furthermore, the opportunity cost of polluting (using the permit) is the price of the permit. In other words, firms are forced to face the cost of polluting. So although firms receive a monetary benefit from the sale of permits, the scheme gives them the incentive to find the cheapest way to reduce pollution.
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The total producer surplus in the entire market is given by the:
A) product of the individual seller's surplus. B) sum of all the individual sellers' producer surplus. C) area between the market supply curve and the market demand curve. D) area between the market demand curve and the price line.
When good weather speeds the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________
A) decrease; sales B) decrease; purchases C) increase; sales D) increase; purchases
If S = 300, T = 800, G = 1100, and I = 150, this makes net foreign investment
A) 150. B) -150. C) 450. D) 750. E) -450.
If the demand faced by a firm is inelastic, selling one more unit of output will:
a. increase revenues. b. decrease revenues. c. keep revenues constant. d. increase profits.