Suppose the government auctions off permits to car and truck owners, with each permit allowing the user to emit five tons of carbon dioxide each year from her or his vehicle. The total amount of carbon dioxide permitted is less than the amount currently emitted by vehicles. These permits could then be bought and sold on a market. Which of the following would occur?
A. People would pay less attention to their vehicle emissions than they do now because they could simply buy a permit and emit more.
B. People would tend to purchase cars that emitted less carbon dioxide.
C. The total amount of fossil fuels burned in vehicles would actually increase.
D. Wealthy people would bear a larger burden under this system, relative to their incomes.
Answer: B
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Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable
Which of the following is a reason why cartels often break down? A) Most cartels do not have a dominant strategy. B) Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement. C) Members of a cartel may resent having to share their profits equally. D) When a cartel is profitable the amount of competition it faces increases.
Using the information in the table shown, the average revenue for 5 units is:
This table represents the revenues faced by a monopolist.
A. $600
B. $300
C. $3,000
D. $120
Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as “fairer.”
Answer the following statement true (T) or false (F)
Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it appraised she learns that it is now worth $3,000. Based on this information:
A. Elaine's wealth is unchanged. B. Elaine's saving this year has increased by $500. C. Elaine's saving this year has decreased by $500. D. Elaine has experienced a $500 capital gain.