Which of the following provides an example of command-and-control regulation?
a. Taxing producers based on the external costs created by their pollution, thus internalizing external costs
b. Requiring firms to reduce their pollution by 50 percent, thus allowing them to emit 50 percent of their historical emissions, and allowing them to freely buy and sell allowances.
c. Requiring firms to use a particular type of pollution-control technology, such as smokestack scrubbers or catalytic converters.
d. Subsidizing firms that exceed their pollution-control targets.
c
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Consider the following:
Farmer Jones bought seed and fertilizer for $100. He grew wheat that he sold to the Acme Bread Company for $200. Acme Bread produced and sold bread to the ABC Grocery Store for $250. Consumers bought the bread from the grocery for $350. How much was added to the GDP? A) $600 B) $800 C) $350 D) $700
Suppose a business offers a 10% discount on the good x1 that it sells.
a. Illustrate a consumer's before and after-discount budget constraint by modeling x2 as a composite good. b. Suppose you observe only the after-discount consumption decision of the consumer. Can you tell from this information how much revenue the firm is giving up (from this consumer) by offering the discount? If so, illustrate this in your graph. c. Suppose that, instead of the firm offering the 10% discount, the government subsidized consumption of x1 sufficiently to reduce p1 by 10%. Suppose again that you only observe the after-subsidy decision of the consumer. Can you tell how much of a subsidy payment is made to this consumer by the government? If so, illustrate it in your graph. d. Why are your answers to (b) and (c) different? What will be an ideal response?