Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted. ProcessABCDE(smoke/day)(4 tons/day)(3 tons/day)(2 tons/day)(1 tons/day)(0 tons/day)Cost to Industrio ($/day)$350$400$500$700$1,000Cost to Capitalista
($/day)$225$250$290$400$600 Given that both firms are currently using process A, the cost of requiring the firms to reduce pollution by 25 percent is ________ per day.
A. $215
B. $375
C. $75
D. $790
Answer: C
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A) Real wages will fall. B) The aggregate price level will increase. C) Equilibrium unemployment will fall. D) The real interest rate will increase.
The marginal revenue product of labor is
A) the marginal physical product multiplied by marginal revenue. B) the marginal revenue of output multiplied by the price of the input. C) total sales divided by total labor employed. D) total labor employed divided by total sales.
When the price of a good or service changes,
a. the demand curve shifts in the opposite direction. b. the supply curve shifts in the opposite direction. c. the supply curve shifts in the same direction. d. there is a movement along a given supply curve.
In the mainstream view, one major source of instability in the macro economy is the volatility of:
A. Product prices B. Investment spending C. Consumer spending D. Labor wages