Question

1.

As long as two firms have different abatement costs, they:

Group of answer choices

can benefit under a system of marketable pollution permits by trading the right to pollute.

will prefer a pollution tax to a system of marketable pollution permits.

will decrease the price of their product if taxed on the amount of pollution they emit.

will not be able to benefit from trading the right to pollute under a system of marketable pollution permits.

2.

Because pollution taxes raise the costs of production for firms that pollute, the firms that pollute:

Group of answer choices

will charge lower prices to consumers.

will charge higher prices to consumers.

will increase the quantity produced at every price.

will quit producing goods that generate pollution.

3.

Due to the existence of external benefits associated with public goods:

Group of answer choices

private markets will lead to an efficient allocation of resources.

government intervention can correct the problem of underproduction of the good.

private markets will correct for the underproduction of the good.

the free-rider problem is eliminated.

4.

Consider a labor market in equilibrium. If the demand curve shifts to the right while the supply curve stays constant, then the wage rate in the market will ________.

Group of answer choices

increase

decrease

remain unchanged

either increase or decrease or remain unchanged

5.

The relationship between the wage and the quantity of labor that a given worker is willing to provide is called:

Group of answer choices

individual labor demand.

market labor demand.

individual labor supply.

market labor supply.

Answer 1

1> can benefit under a system of marketable pollution permits by trading the right to pollute.

If they have different abatement cost, they can trade the permit so that the one with the lower MAC will reduce emission more and thus it leads to a more efficient production overall.

2> will charge higher prices to consumers.

A pollution tax increases the cost of production, thus the supply curve will shift to the left, so the price will increase.

3> government intervention can correct the problem of underproduction of the good.

If a good has a positive externality, market will produce less amount of it and thus it leads to market failure, government intervention is required for market correction to produce more of that good.

4> increase

Since the demand for labor has increased, there will be a higher price or wage for the labor.