Suppose that a powerplant is given a permit to pollute 10 tons of carbon into the atmosphere. As the powerplant operates, it can generate $200 of profit selling electricity per ton of carbon that it sends into the atmosphere. If the price of the carbon permit is $100 per ton, then:
A. the powerplant is better off shutting down and selling its permit.
B. the powerplant is better off buying more permits and selling more electricity.
C. the powerplant is better off selling electricity and using the permits to pollute 10 tons of carbon.
D. the powerplant is better off shutting down and buying more permits.
Answer: B
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The monetary transmission mechanism that assumes that money supply growth stimulates the economy primarily by encouraging investment is
A) the classical transmission mechanism. B) pre-Keynesian transmission mechanism. C) the interest-rate-based transmission mechanism. D) the post-Keynesian transmission mechanism.
In winter, Europeans and Americans flock to Switzerland to ski. We would expect to see the Swiss franc
a. depreciate because there is an increase in the demand for Swiss goods and services, which means an increase in the demand for Swiss francs b. appreciate because there is an increase in the demand for Swiss goods and services, which means a decrease in the demand for Swiss francs c. remain fixed because the demand for Swiss goods and services is counterbalanced by the supply of Swiss goods and services d. appreciate because there is an increase in the demand for Swiss goods and services, which means an increase in the demand for Swiss francs e. restored to equilibrium because the summer months see Swiss tourists in Europe and the U.S.