The cost of inflation to society includes I. the opportunity costs of resources used by people to protect themselves against inflation. II. the diversion of productive resources to forecasting inflation

Arbitrage with two currencies is NOT possible when:

a. there is an exchange rate difference in two markets. b. traders are familiar with markets. c. the exchange rates are in equilibrium, and the same is occurring in all markets. d. the exchange rates are extremely volatile.

Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $120,000. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean, and $300,000 if it's polluted. Suppose there is no law preventing the firm from polluting the river. Which of the following describes an efficient outcome in this case?

A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river. B. The farmer is unable to pay the owner of the mill enough to get him to stop polluting. C. The owner of the mill pays the farmer $110,000 for his permission to pollute the river. D. The farmer pays the owner of the mill $90,000 to stop polluting.