The main disadvantage of an emissions tax is that
a. The total pollution reduction from an emissions tax can not be known for sure
b. Firms lack the flexibility to pursue different technologies
c. Firms do not have an incentive to reduce pollution
d. Firms can not be behave in an economically-efficient manner
e. Differences among firms are not incorporated into the policy
Answer: a. The total pollution reduction from an emissions tax can not be known for sure
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If a consumer purchases only two goods (X and Y ) and the demand for X is elastic, then a rise in the price of X
a. will cause total spending on good Y to rise. b. will cause total spending on good Y to fall. c. will cause total spending on good Y to remain unchanged. d. will have an indeterminate effect on total spending on good Y.
Transfer prices should be set to so
A) to maximize profits for only one unit in a multi-unit firm. B) allow arbitrage with the external market place. C) to maximize profits for the overall firm. D) none of these choices.