According to the CPI basket, the largest item in the households' budgets is

What is the best hope for reducing environmental pollution in less-developed nations?

A) limiting international trade B) boycott of polluting nation's products C) producing the goods in advanced, economically developed nations D) free international trade that raises incomes in less-developed nations E) strong international standards for pollution control

Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200 . Suppose that the farmer has the right to

compensation for any damage that his crops suffer. Assume that there are no transaction costs. Which of the following characterizes the efficient outcome? a. The railroad will continue to operate but will pay the farmer $1,500 in damages. b. The railroad will purchase the grease for $1,200 and pay the farmer nothing because no crop damage will occur. c. The farmer will incur $1,500 in damages to his crops. d. The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.