Suppose the government is interested in mitigating the effects of CO2 emissions on climate change. Which of the following would be the most effective economic policy for reducing CO2 emissions?
a. A carbon tax levied on polluters per ton of CO2
b. A price floor imposed on the price of CO2
c. A carbon subsidy on polluters per ton of CO2
d. A sternly worded letter from the UN detracting companies who polluting
Ans: a. A carbon tax levied on polluters per ton of CO2
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Explain the difficulty with applying the benefits principle and give examples
What will be an ideal response?
Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. What is the marginal propensity to save for this economy?
a. 0.5 b. 0.25 c. 0.65 d. 0.35 e. Cannot be determined
In the long run:
A. some inputs can be varied and no inputs are fixed. B. all inputs can be varied and no inputs are fixed. C. some inputs can be varied and some inputs are fixed. D. no inputs can be varied and all inputs are fixed.
Producers want to calculate the price elasticity of demand because they want to:
A. know the goods and services for which consumers are most sensitive to price changes. B. understand what goods their customers dislike the most. C. know that consumers will have the same response to a price change regardless of the good or service. D. be able to predict the future preferences of their customers.