SouthState Chemical Co. produces pine oil cleaners in a process that produces emissions that discolor the paint on nearby houses, although the emissions have been declared nontoxic to humans.
a. Is the price for the cleaner likely to be allocatively efficient? Use a graphic illustration in your answer.
b. If your answer to (a) is no, what is an appropriate government policy to correct the problem?
What will be an ideal response?
a. No, the price for the cleaner is too low; marginal social cost is greater than marginal private cost. The graphic illustration should resemble Figure 15-2 in the text.b. The chemical company might be taxed to the extent of the damages sustained by homeowners to raise the marginal private cost to equal marginal social cost.
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The goal of fiscal policy is to ________, and typically focuses on ________
A) balance the federal budget; tax rates and tax revenues B) stabilize the supply of money in the economy; price stability C) reduce the severity of economic fluctuations; employment and production D) eliminate balance of payments deficits or surpluses; exchange rate stability
The U.S. tax system currently levies taxes on unrealized capital gains
a. True b. False
Should regular saving be an item in your personal budget?
A) No, it is not necessary to save as long as you have the borrowing power to deal with unexpected expenditures. B) Yes, regular saving for both unexpected emergency expenses and big-ticket items like the down payment for a house will increase your financial security. C) Yes, but when you are young, it only makes sense to save for big-ticket items like a car or a European vacation. D) No, you can always start saving in the future when you have a larger income.
The absolute price elasticity of demand for a vertical demand curve
A. is infinite. B. is 0. C. is 1.0. D. depends on where one is on the demand curve.