Which of the following statements about pollution or pollution control is TRUE?
A) A nationwide uniform tax on emissions is the appropriate way to reduce pollution levels.
B) A tax to reduce pollution levels should be based on the economic damages rather than on the absolute amount of pollution.
C) Private costs of pollution usually exceed social costs.
D) The optimum amount of pollution abatement is where the total benefits of pollution abatement equal the total costs of pollution abatement.
Answer: B
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If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit
a. is $100 b. is $5 c. is $40 d. is $8 e. cannot be determined without total cost
Answer the following statements true (T) or false (F)
1. The income and substitution effects will both induce the consumer to buy more of a normal good when its price decreases. 2. Someone who pays $800 to fly from one city to another instead of paying only $100 for a bus trip between the two cities is making an irrational choice and is thus not maximizing his utility. 3. If consumers are convinced by ads that Brand X has a lot more value than they originally thought, then the MU/P of X will decrease. 4. The budget line shows all the combinations of two products which the consumer can buy, given money income and product prices. 5. If the quantity of X is measured on the horizontal axis and the quantity of Y on the vertical, then the slope of the budget line is equal to the price of X divided by the price of Y.