Suppose that the EPA limits the pollution level of two firms, firm High with high cost of reducing pollution and firm Low with low cost of reducing pollution. Which statement is correct?
The EPA should allow High to increase its pollution level and trade with Low who would cut its pollution to lower than the required level.
The EPA should allow Low to increase its pollution level and trade with High who would cut its pollution to lower than the required level.
The EPA should limit High's pollution level to a lower level than Low's in an attempt to entice High to find more efficient ways to lower its costs.
The EPA should limit both firms' pollution to the same level.
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According to the "Some Economics of Addiction" mini-lecture: An addictive good is one for which demand is ______ and current and future use are ______.
inelastic; complements
elastic; complements
elastic; substitutes
inelastic; substitutes
None of the other choices is correct.
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The most important determinant of the elasticity of demand is the:
level of income in the economy.
size of the population.
number of consumers.
number of substitutes.
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Consider the example from the "Some Economics of Addiction" mini-lecture: If the DEA arrests more drug dealers, total spending on drugs will ____ and the total revenue earned by drug dealers will _____.
decrease; increase
increase; increase
decrease; decrease
increase; decrease
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The elasticity of demand measures how sensitive the:
demand is to a change in the number of suppliers.
quantity demanded is to a change in price.
price is to a change in quantity demanded.
price is to a change in the quantity supplied.
the EPA should limit both firms' pollution to the same level.
To control the pollution level effciently both firms' pollution level must be set same.
elastic; complements
Consumption of addictive goods is not affected by the price their consumption remains same even if price increases and their current and future use is complement to each other as current use leads to the future use
number of substitutes
number of substitutes decides the elasticity in the demand of units of any particular commodity
decrease; increase
spending on drugs will decreses leading to increases revenue due to lesser stock and higher prices in the market
quantity demanded is to a change in price.
Elasticity is the measure of change in demand due to change in prices.
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