Economic

Q: Which of the following is motivated by an efficiency concern? A) In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina. B) Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium. C) The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. D) The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Q: Which of the following is motivated by an equity concern? A) Some states have transferred funds to food bank programs in order to increase benefits to lower-income families. B) Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in California. C) The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. D) The United States offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products.

Q: In economics, the term "equity" means A) everyone has an equal standard of living. B) the hardest working individuals consume all they want. C) only elected officials have high standards of living. D) economic benefits are distributed fairly.

Q: Political candidates often hold fund raisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Is this transaction economically efficient? A) No, political candidates should never be allowed to overcharge for a fund raising dinner. B) Yes, it was a voluntary exchange that benefited both parties. C) No, Wendy paid too much for four dinners. D) Yes, it is efficient only from the perspective of the candidate but not from the perspective of Wendy.

Q: Which of the following is a result of a market economy? A) environmental protection B) an equal income distribution C) agreement on equity D) voluntary exchange

Q: Voluntary exchange between buyers and sellers generates ________ in a market economy. A) scarcity B) allocative efficiency C) productive efficiency D) equity

Q: Which of the following generates productive efficiency? A) competition among sellers B) competition among buyers C) government inspectors D) government production rules and regulations

Q: ________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production. A) Competition B) Voluntary exchange C) Equity D) A centrally planned economy

Q: Which of the following statements is true about competition in a market? A) Competition forces firms to outsource the production of their labor-intensive products. B) Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible. C) Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. D) Competition forces firms to add only low profit margins to their costs of production.

Q: Markets promote A) equity and competition. B) voluntary exchange and equality. C) equity and equality. D) competition and voluntary exchange.

Q: Allocative efficiency is achieved when firms produce goods and services A) at the lowest possible cost. B) that consumers value most. C) at the lowest opportunity cost. D) at a marginal cost of zero.

Q: When production reflects consumer preferences, ________ occurs. A) allocative efficiency B) productive efficiency C) equity D) efficient central planning

Q: Productive efficiency is achieved when A) firms add a low profit margin to the goods and services they produce. B) firms produce the goods and services that consumers value most. C) firms produce goods and services at the lowest cost. D) there are no shortages or surpluses in the market.

Q: ________ is a situation in which a good or service is produced at the lowest possible cost. A) Allocative efficiency B) Productive efficiency C) Equity D) Optimal marginalism

Q: All of the following contributed to the downfall of the Soviet Union in 1991 except A) public dissatisfaction with low living standards and political repression. B) an inability to produce low-cost consumer goods that households wanted. C) lack of high-quality goods and services. D) lack of a strong dictator who can coordinate economic activities.

Q: Which of the following is a problem inherent in centrally planned economies? A) Households and firms make poor decisions in choosing how resources are allocated. B) There is too little production of low-cost, high-quality goods and services. C) Production managers are more concerned with satisfying consumer wants than with satisfying government's orders. D) Exports tend to exceed imports.

Q: How are the fundamental economic questions answered in a market economy? A) The government alone decides the answers. B) Individuals, firms, and the government interact in markets to decide the answers to these questions. C) Households and firms interact in markets to decide the answers to these questions. D) Large corporations alone decide the answers.

Q: How are the fundamental economic decisions determined in North Korea? A) Individuals, firms, and the government interact in a market to make these economic decisions. B) These decisions are made by the country's elders who have had much experience in answering these questions. C) The government decides because North Korea is a centrally planned economy. D) The United Nations decides because North Korea is a developing economy.

Q: Who receives the most of what is produced in a market economy? A) lawmakers and other politically favored groups B) those who are willing and able to buy them C) everyone receives an equal amount D) people who earn the highest incomes

Q: Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish? A) Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. B) Failure to do this could lead to an inequitable allocation of goods and services produced. C) Failure to do this could lead to drastic shortages of good and services. D) Failure to do this could reduces efficiency and leads to an inequitable allocation of output.

Q: Which of the following statements about the economic decisions consumers, firms, and the government have to make is false? A) Governments face the problem of scarcity in making economic decisions. B) Only individuals face scarcity; firms and the government do not. C) Both firms and individuals face scarcity. D) Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

Q: The decision about what goods and services will be produced made in a market economy is made by A) lawmakers in the government voting on what will be produced. B) workers deciding to produce only what the boss says must be produced. C) producers deciding what society wants most. D) consumers and firms choosing which goods and services to buy or produce. E) consumers dictating to firms what they need most.

Q: Consider the following economic agents: a. the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy? A) the government B) producers C) consumers D) consumers and producers E) the government, consumers and producers

Q: Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks and compact cars. What fundamental economic question are they addressing by making this range of products? A) How to produce goods that consumers want? B) Why produce a variety of automobiles? C) What to produce? D) Who to produce automobiles for?

Q: The distribution of income primarily determines which of the fundamental economic questions? A) What goods and services are to be produced? B) How the goods and services are to be produced? C) Who will receive the goods and services produced? D) How to plan the economy?

Q: Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision? A) zero, since she will no longer be earning a salary B) It depends on the "going rate" for home-care providers. C) at least $125,000 D) the value she attributes to the satisfaction she receives from taking care of her parents

Q: The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a Russian tea cake? A) 2 1/2 cappuccinos B) 2/5 of a cappuccino C) $2.50 D) $1.00

Q: The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino? A) 2 1/2 Russian tea cakes B) 2/5 of a Russian tea cake C) $2.50 D) $1.00

Q: The highest valued alternative that must be given up to engage in an activity is the definition of A) economic equity. B) marginal benefit. C) opportunity cost. D) marginal cost.

Q: Which of the following is not an example of an economic trade-off that a firm has to make? A) whether it is cheaper to produce with more machines or with more workers B) whether it is to outsource the production of a good or service C) whether or not consumers will buy its products D) whether it should produce more of its product

Q: Which of the following statements is true? A) Anytime you have to decide which action to take you are experiencing economic equity. B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. C) Every individual, no matter how rich or poor, is faced with making trade-offs. D) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited.

Q: Society faces a trade-off in all of the following situations except A) when deciding who will receive the goods and services produced. B) when deciding what goods and services will be produced. C) when deciding how goods and services will be produced. D) when some previously unemployed workers find jobs.

Q: The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of A) optimization. B) efficiency. C) trade-off. D) equity.

Q: The three fundamental questions that any economy must address are A) What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? B) What goods and services to produce; how will these goods and services be produced; and who receives them? C) Who gets jobs; what wages do workers earn; and who owns what property? D) How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

Q: Suppose a doctor can earn an additional $25,000 in revenue per year by keeping her office open on Sundays. At what additional cost would keeping the office open on Sundays not be considered economically rational?

Q: What is a marginal cost?

Q: A lawsuit seeking compensation for damage from pollution A) will ruin any chances the Coase theorem has of working to avoid the situation in the first place. B) is a substitute for bargaining, but an inefficient one. C) is a substitute for bargaining, and it can lead to the efficient solution. D) is preferable to switching the property rights between the parties. E) is how the Coase theorem was meant to work in the first place.

Q: Scenario 1:It is the factory's choice whether to install a filter. It is the choice of the nearby fishermen whether to install a treatment plant. Dollar figures show profit. The factory and the fishermen can negotiate costlessly, and no one else is affected by the result. Factory FishermenA: No filter or treatment plant $10,000 $2,000B: Filter; no treatment plant $6,000 $10,000C: No filter; treatment plant $10,000 $4,000D: Filter; treatment plant $6,000 $6,000the Coase theorem specifies thatA) the result will be different if the fishermen are given the right to clean water than it will be if the factory is given the right to use the water as it sees fit, but the result will be inefficient in either case.B) the efficient result will occur whether the fishermen are given the right to clean water or the factory is given the right to use the water as it sees fit.C) economic efficiency requires that the fishermen be given the right to clean water.D) economic efficiency requires that no one may contaminate the water.E) economic efficiency requires that the fishermen be given the right to clean water and that the factory be given the right to use the water as it sees fit.

Q: Scenario 1:It is the factory's choice whether to install a filter. It is the choice of the nearby fishermen whether to install a treatment plant. Dollar figures show profit. The factory and the fishermen can negotiate costlessly, and no one else is affected by the result. Factory FishermenA: No filter or treatment plant $10,000 $2,000B: Filter; no treatment plant $6,000 $10,000C: No filter; treatment plant $10,000 $4,000D: Filter; treatment plant $6,000 $6,000If the fishermen are given the right to clean water,A) the outcome will be more efficient than if the factory is given the right to use the water as it sees fit.B) the outcome will be less efficient than if the factory is given the right to use the water as it sees fit.C) the efficient outcome will occur no matter who is given which property right, and the individual gains will be the same in each case.D) the factory will be forced to shut down.E) the efficient outcome will occur no matter who is given which property right, but how that maximum gain is split will be determined during bargaining.

Q: Scenario 1:It is the factory's choice whether to install a filter. It is the choice of the nearby fishermen whether to install a treatment plant. Dollar figures show profit. The factory and the fishermen can negotiate costlessly, and no one else is affected by the result. Factory FishermenA: No filter or treatment plant $10,000 $2,000B: Filter; no treatment plant $6,000 $10,000C: No filter; treatment plant $10,000 $4,000D: Filter; treatment plant $6,000 $6,000Which of the following is TRUE?A) The factory will never agree to B, because that would leave them with much less profit than the fishermen.B) C will never occur because that would leave the fishermen with much less profit than the factory.C) If the factory refused to install a filter, the fishermen would refuse to install a treatment plant.D) The factory must install a filter, because they contaminate the water.E) The profits above indicate profit before any agreement is made, and profit varies enough to make a mutually acceptable agreement possible.

Q: In which of these situations would the Coase theorem be MOST likely to work? A) A thousand firms use a lake, there are no other users, all their costs could be reduced somewhat by polluting, but all would have lower water intake costs if the lake were clean. B) A group of nine firms use a lake, there are no other users, all their costs could be reduced somewhat by polluting, but all would have lower water intake costs if the lake were clean. C) Worldwide deep sea fishing rights need to be negotiated among thousands of fishermen from different countries. D) One hundred and fifty nations need to come to an accord about CFC generation to combat ozone depletion. E) A group of chemical firms high upstream on the Mississippi River have emissions that affect not only communities downstream along the river, but around the Gulf of Mexico as well.

Q: When there are externalities, economic efficiency can be achieved without government intervention A) at no time. B) when the externality affects many people and property rights are not well defined. C) when the externality affects many people and property rights are well defined. D) when the externality affects only a few parties and property rights are not well defined. E) when the externality affects only a few parties and property rights are well defined.

Q: Suppose the Environmental Protection Administration (EPA) proposes a change in automobile exhaust systems that reduces the amount of greenhouse gases (GHGs) emitted into the atmosphere, and they estimate that the net present value (NPV) of this policy change is worth $3 trillion dollars. To form this estimate, the EPA staff members assumed a particular social discount rate and a particular stock dissipation rate for GHGs. What happens to the NPV of this proposed policy if the staff members use a smaller stock dissipation rate? A) NPV increases B) NPV declines C) NPV remains unchanged D) We do not have enough information to answer this question

Q: Government water resource specialists have estimated that the Great Lakes currently contain about 200 thousand tons of pesticide pollutants, the amount of new pesticide pollutants that enter the lakes are about 20 thousand tons per year, and the stock of pesticide pollutants was about 200 thousand tons last year. Based on this information, what is the stock dissipation rate? A) Zero B) 5 percent C) 10 percent D) 20 percent

Q: Which of the following factors influence the appropriate value for the social rate of discount used in NPV analysis of stock externalities? A) Expected rate of economic growth B) Extent of social risk aversion C) The society's rate of time preference D) all of the above

Q: Which of the following examples is NOT a negative stock externality? A) Goodwill generated by a company B) Noise pollution from an airport C) Odors emitted from a paper mill D) None of these cases are examples of negative stock externalities

Q: Plants, trees, and soils naturally emit carbon dioxide (CO2) that enters the atmosphere. To form a benchmark level for this greenhouse gas, we can determine the amount of CO2 that would end up in the atmosphere if there were no human activity on the planet. Suppose naturally occurring CO2 emissions are 5 million tons per year, the social discount rate is 5%, and the stock dissipation rate is 2%. What is the eventual level of CO2 in the atmosphere if these natural emissions continue at this rate forever? A) 100 million tons B) 250 million tons C) 25 million tons D) We do not have enough information to answer this question.

Q: The social discount rate is an important component in net present value (NPV) calculations for public policies related to stock externalities, but economists do not agree on which value to use for this rate. Suppose a recent study reports that the NPV of a proposed carbon tax intended to reduce carbon dioxide emissions is positive, but the annual net benefits do not become positive until 2060. The authors of the study used a social discount rate of 2%. What can we say about the findings of the study if the research were repeated with a higher social discount rate? A) NPV would decline, and the annual net benefits would become positive after 2060. B) NPV would increase, and the annual net benefits would become positive before 2060. C) NPV would decline, and the annual net benefits would not change. D) The findings of the study would not change.

Q: Suppose the current stock of greenhouse gases in the atmosphere is 100 million tons, the stock dissipation rate is 0.02, and we will emit 4 million tons into the atmosphere this year. What is the stock level of greenhouse gases expected to be for next year? A) 98 million tons B) 100 million tons C) 102 million tons D) 104 million tons

Q: Even if we were able to completely eliminate greenhouse gas (GHG) emissions today, the problems associated with the accumulated stock of GHGs in the atmosphere will persist for a long time because: A) their dissipation rate is very low. B) their dissipation rate is very high. C) the social discount rate is very low. D) the social discount rate is very high.

Q: Use the following statements to answer this question: I. Stock externalities depend on the accumulated results of actions by producers or consumers, not on the incremental results that may occur in a given period of time. II. Stock externalities are always negative externalities. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II is false.

Q: In general, the current stock of pollutants (St) may be modeled as St = Et + (1 - d)St-1 where d is the ________ and Et is the ________. A) social discount rate, previous stock level B) social discount rate, current emissions C) stock dissipation rate, previous stock level D) stock dissipation rate, current emissions

Q: The marginal social costs and abatement costs of a certain type of air pollution for a factory are given as: MSC = -1121 + 22.5Q MCA = 879 - 17.5Q, where Q = units of pollution per day, and MSC and MCA are measured in dollars. The factory is located in a small town that is currently setting community standards. You have been hired to perform the analysis requested below. a. If the community wishes to set a pollution standard for the factory, what daily level of pollution should be allowed? b. As an alternative, some members of the town council favor an emissions tax for the factory. If a tax is implemented, at what level should the tax be set?

Q: Consider a situation in which the government has limited information about costs and benefits of pollution abatement associated with a given industry. However, it is known that the marginal social cost curve for emissions is much steeper than the marginal cost of abatement curve (in absolute terms). In this situation, which method of emissions control is preferable when the greatest concern is with accuracy of control rather than the cost of control? That is, should a fee be used or should a standard be used? Explain.

Q: Many communities use a mixed-flow recycling program in which various types of bottles, cans, and other containers are placed in a single recycling bin. Suppose a community alters its recycling program by mandating that the containers must be sorted by type of material (i.e., glass, aluminum, plastic). What is the expected impact of this change on the optimal quantity of unredeemed (scrapped) containers? A) Optimal quantity increases B) Optimal quantity decreases C) Optimal quantity remains unchanged D) We cannot determine the outcome of this policy change without having more information

Q: Many states use container redemption programs to encourage reuse of glass bottles and other recyclable containers. Suppose a state has a current redemption program that imposes a 10-cent per container fee, and then the state increases the fee to 15 cents per container. What is the expected impact of this change on the optimal quantity of unredeemed (scrapped) containers? A) Optimal quantity increases B) Optimal quantity decreases C) Optimal quantity remains unchanged D) We cannot determine the outcome of this policy change without having more information

Q: Which is NOT a weakness of the policy of mandatory separation of recyclables? A) It actually pays people to use more recyclable material, and thus more material in total. B) It is costly for households in terms of time spent. C) It is costly for the government to monitor. D) Individuals may shift away from recyclable to non-recyclable materials just so they don't have to bother to separate them. E) Implementation is difficult and consumes household space.

Q: Menell's study showed that in terms of effectiveness, A) mandatory separation of recyclables was best, followed by curbside charges and finally refundable deposits. B) mandatory separation of recyclables was best, followed by refundable deposits and finally curbside charges. C) curbside charges were best, followed by refundable deposits and finally mandatory separation of recyclables. D) curbside charges were best, followed by mandatory separation of recyclables and finally refundable deposits. E) refundable deposits were best, followed by curbside charges and finally mandatory separation of recyclables.

Q: Having a refundable deposit for recyclable material A) raises the marginal private cost of disposal. B) raises the marginal social cost of disposal. C) lowers the marginal private cost of disposal. D) lowers the marginal social cost of disposal. E) does not affect disposal costs.

Q: The efficient level of recycling equates the A) marginal cost of scrap disposal to the marginal benefit from not using virgin materials. B) marginal cost of recycling to the marginal benefit from not using virgin materials. C) marginal cost of scrap disposal to the marginal cost of recycling. D) marginal private cost of disposal to the marginal cost of recycling. E) per-unit refund from recycled materials to the marginal benefit from not using virgin materials.

Q: If households could be charged differently for different types of garbage, A) the total amount of garbage would be reduced. B) recycling would be more difficult. C) costs of collecting garbage could be kept much lower. D) billing for garbage collection would be much easier. E) there would be a change in the types of items that are disposed of as garbage.

Q: If households pay a fixed annual fee for trash disposal, A) households will all tend to produce the same amount of garbage. B) households have no incentive to cut back on the amount of garbage they generate. C) that fee will provide households with an incentive to cut back on the amount of garbage they generate. D) that fee will discourage households from throwing out reusable materials. E) that fee will discourage households from throwing out toxic or otherwise harmful materials.

Q: When new technologies make cleaner production possible, A) emissions fees rise. B) emissions fees fall. C) the price of transferable permits rises. D) the price of transferable permits falls. E) the quantity of transferable permits falls.

Q: When new technologies make cleaner production possible, A) emissions would fall under a system of fees, but would not fall under a system of transferable emissions permits unless the government bought back some of the permits. B) emissions would fall under a system of permits, but would not fall under a system of fees unless the government raised them. C) the price of transferable permits would rise. D) the quantity of transferable permits would rise. E) the quantity of transferable permits would fall.

Q: Transferable permits allow emission reduction to be achieved A) without any impact on the industrial sector, just as a standard would. B) without any impact on the industrial sector, just as fees would. C) at the lowest possible cost. D) with firms monitoring each other, rather than having the government do the monitoring. E) Both C and D are true.

Q: If X transferable emissions permits are issued and there are n potential polluters, A) the government must initially assign each of the potential polluters X/n permits. B) the government must assign X/n permits to each potential polluter and check periodically that those permits have not moved. C) emissions will be the same whether or not the permits are split equally, so long as none of the permits are issued outside the group. D) emissions will be the same no matter who receives them first, so long as the recipient is willing and able to participate in the permit market. E) emissions will be less if the permits are given initially to firms with lower abatement costs.

Q: Under a transferable emissions permit system with n possible polluters, the government enforces the total amount of emissions allowable at X units by A) setting a different fee for each firm so that each firm chooses to emit X/n units. B) setting the same fee for each firm so that each is forced to emit X/n units. C) setting a different standard for each firm, with X/n being the average. D) setting the same standard for each firm at X/n. E) issuing X permits.

Q: Under a transferable emissions permit system, A) the firms with the lowest marginal abatement cost curves will reduce emissions most. B) the firms with the highest marginal abatement cost curves will reduce emissions most. C) the firms with the lowest marginal social cost curves will reduce emissions most. D) the firms with the highest marginal social cost curves will reduce emissions most. E) all firms will reduce emissions equally.

Q: In equilibrium, the price of a transferable emissions permit A) is constrained to the amount the government first charged for it. B) equals the marginal cost of abatement for all firms. C) equals the marginal cost of abatement for the firm with the highest cost, and exceeds the marginal cost of abatement of other firms. D) equals the marginal cost of abatement for the firm with the lowest cost, and is less than the marginal cost of abatement of other firms. E) equals the marginal social cost of emissions.

Q: If error in setting the policy is possible, A) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively flat. B) a standard generates smaller welfare losses than a fee when the MSC and MCA are both relatively steep. C) a standard generates smaller welfare losses than a fee when the MSC is relatively steep and the MCA is relatively flat. D) a standard generates smaller welfare losses than a fee when the MSC is relatively flat and the MCA is relatively steep. E) errors in standards and fees have equal welfare losses, so long as the errors are the same in percentage terms.

Q: Which is NOT an advantage of emissions fees over standards? A) Fees can give a firm the incentive to reduce emissions below the standard when new technology allows. B) Fees can reduce the cost of attaining some goal level of emissions when firms all have the same abatement costs. C) Fees can reduce the cost of attaining some goal level of emissions when firms have different abatement costs and different standards can be assigned to different firms. D) Fees can reduce the cost of attaining some goal level of emissions when firms have different abatement costs and different standards cannot be assigned to different firms. E) Fees may provide an incentive for a firm to investigate emissions-reduction technology that will reduce emissions below existing standards.

Q: A firm will avoid producing additional emissions whenever the fee is A) less than the MSB. B) greater than the MSB. C) less than the MCA. D) greater than the MCA. E) equal to the distance between MSB and MCA.

Q: If the MSB/MCA graph indicates that an emissions fee of $10 per unit would lead to the optimum level of emissions, but the government set a fee of $5 per unit, emissions would A) not be reduced at all. B) not occur at all. C) be above the optimum level, but curtailed somewhat from what they would have been with no fee at all. D) be above the optimum level by 50%. E) be below the optimum level by 50%.

Q: To enforce the optimum level of emissions, a government could set an emissions fee, which would be A) the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit of pollutants the firm emitted. B) the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit of pollutants the firm emitted above the standard. C) the vertical intercept of the MSB curve. D) the vertical intercept of the MCA curve. E) the vertical distance between the intercepts of the MSB curve and the MCA curve.

Q: To enforce the optimum level of emissions a government could set an emissions standard at the quantity A) where the MSB curve crosses the MCA curve. B) located at the vertical intercept of the MSB curve. C) located at the horizontal intercept of the MSB curve. D) located at the vertical intercept of the MCA curve. E) located at the horizontal intercept of the MCA curve.

Q: Left alone, with no government interference, a profit-maximizing firm will produce emissions A) where the MSB curve crosses the MCA curve. B) at the vertical intercept of the MSB curve. C) at the horizontal intercept of the MSB curve. D) at the vertical intercept of the MCA curve. E) at the horizontal intercept of the MCA curve.

Q: As you move rightward on a marginal cost of abatement curve, emissions are A) falling, and the cost of eliminating the marginal unit falls. B) rising, and the cost of eliminating the marginal unit falls. C) falling, and the cost of eliminating the marginal unit rises. D) rising, and the cost of eliminating the marginal unit rises. E) rising, and the cost of eliminating the marginal unit is constant.

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