If two firms pollute, and the increase in costs to Firm A from decreasing pollution is equal to the decrease in costs to Firm B from increasing pollution:
A. the firms cannot benefit from trading the right to pollute.
B. the firms can benefit by trading the right to pollute.
C. while both firms can benefit from trading, there is no way for them to determine an agreeable price.
D. both firms will stop polluting.
Answer: A
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Because of an expected rise in interest rates in the future, a banker will likely
A) make long-term rather than short-term loans. B) buy short-term rather than long-term bonds. C) buy long-term rather than short-term bonds. D) make either short or long-term loans; expectations of future interest rates are irrelevant.
One advantage of a tariff over a quota, from the perspective of the nation imposing it, is that a tariff
a. decreases the domestic price b. increases the foreign price c. increases the quantity of imports d. decreases the quality of imports e. raises tax revenue