A plastics factory emits water pollutants into a nearby river
The marginal private cost of producing plastics is constant, the marginal external cost of the pollutants increases with the quantity of plasticis, and the demand for plastics is downward sloping. What happens to the socially optimal level of output and market price if the marginal external cost curve shifts upward? A) Optimal price and quantity decrease
B) Optimal price increases, optimal quantity remains unchanged
C) Optimal price increases, optimal quantity decreases
D) Optimal price and quantity decline
C
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Suppose that the spot exchange rate for a foreign currency is equal to $120, while the interest rate in dollars is 2% and the interest rate in the foreign currency is 3%. What is the approximate forward rate that is consistent with this situation?
A) $115.56 B) $124.44 C) $118.77 D) None of the above.
Which of the following statements is true?
a. Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. b. Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. c. According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. d. All of these.