Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates
before it reaches the river. The government gives each firm 20 pollution permits. Government officials are not sure whether to allow the firms to buy or sell the pollution permits to each other. What is the total cost of reducing pollution if firms are not allowed to buy and sell pollution permits from each other? What is the total cost of reducing pollution if the firms are allowed to buy and sell permits from each other?
a. $3,000 . $1,500
b. $4,500; $3,500
c. $4,500; $4,000
d. $4,500; $2,500
b
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The best remedy for market failure is often
a. a market-based solution. b. shutdown of the market. c. no government intervention. d. externalizing the externalities.
Over the past 50 years, the growth of real GDP in the United States has been caused primarily by increase in the _____.
Fill in the blank(s) with the appropriate word(s).
The above table shows Tammy's total utility from videos and CDs. If Tammy has $70 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then the maximum utility Tammy can attain is
A) 450. B) 1280. C) 1150. D) 1200.
5. When does equilibrium occur?
a. when quantity supplied equals quantity demanded b. when demand equals supply c. when consumers buy as much of the good as they want d. when suppliers sell as much of the good as they want