The Coase theorem asserts that:
a. government intervention is necessary to deal with externalities.
b. there are no costs associated with pollution abatement.
c. when there are external costs, the industry supply curve reflects the true social costs.
d. when externalities are present, an economy can reach an efficient solution as long as transactions costs are not too high.
Ans: d. when externalities are present, an economy can reach an efficient solution as long as transactions costs are not too high.
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What is the infant-industry argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage. B) Any firm necessary in wartime must be protected. C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped. D) Domestic jobs must be protected from competition from low-paid foreign workers. E) Foreigners selling products in the economy limit the nation's diversity and stability.
Refer to Figure 2-10. If the economy is currently producing at point A, what is the opportunity cost of moving to point B?
A) 46 thousand forks B) 60 thousand spoons C) 16 thousand spoons D) 12 thousand forks