"Creating a free market for carbon-dioxide emission permits would only encourage firms to pollute more." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. In a market of carbon-dioxide permits, firms that exceed their pollution limits must buy permits from firms that emit less than their limits. If an increase number of firms pollute more than their limits, then the market clearing price of the permits will increase. A higher price of the permits will induce firms to reduce their emissions.
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In the figure above, if the firm is regulated using an average cost pricing rule, the economic loss created is equal to the area of
A) ABG. B) BEFG. C) BCFG. D) BCE. E) None of the above because there is no economic loss created.
The curve in the above figure shows alternative combinations of gasoline and coffee that Sam likes equally well. This curve is called
A) a budget line. B) a demand curve. C) a consumption curve. D) an indifference curve.