Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's theorem, the optimal level of trash in the park can be achieved if
A) Al is fined by the government.
B) Al has the right to leave trash and Bert cannot do anything about it.
C) Al has the right to leave trash and Bert can pay him to limit his dumping.
D) Bert moves.
C
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International variables are linked through trade and financial flows. Therefore, what trilemma is faced by a nation that wishes to keep its exchange rates with other nations fixed?
a. It can have fixed exchange rates only when it allows free flows of capital and maintains control of its interest rates. b. It cannot have fixed exchange rates if it does not restrict foreign investment and also wants to control its own monetary policy. c. Fixed exchange rates are not possible if the nation allows free flows of capital both into and out of the nation. d. Fixed exchange rates are not possible if the nation also wants to control its monetary policy.
Neither the demand nor the supply of sugar is perfectly elastic or inelastic. If the government imposes a 5 percent tax on sugar, the
A) price of sugar buyers pay falls by 5 percent. B) price of sugar buyers pay increases by less then 5 percent. C) price of sugar buyers pay does not change. D) quantity of sugar increases. E) price of sugar buyers pay rises by 5 percent.