Managers and entrepreneurs are

Producing leather creates external costs in the form of water pollution. The figure above illustrates the market for leather. If the government sets a pollution limit that achieves efficiency, how many tons of leather are produced?

A) 0 tons B) 200 tons C) 300 tons D) more than 300 tons E) more than 0 tons and less than 200 tons

Answer the following statement true (T) or false (F)

1) Surpluses drive market prices up; shortages drive them down. 2) If demand increases and supply simultaneously decreases, equilibrium price will rise. 3) The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market. 4) An increase in quantity supplied might be caused by an increase in production costs.