6) Tradable allowances: A) are typically hard to pass through the Environmental

Question

6) Tradable allowances: A) are typically hard to pass through the Environmental Protection Agency (EPA) since they allow firms to legally pollute. B) decrease the profitability of firms since C) are an efficient way to reduce pollution at lower costs. D) are equal to the social surplus in the market. The Coase theorem posits that externality problems can be solved without government A) if markets can reach the efficient quantity and if transaction costs exceed the 7) deadweight loss caused in the market. B) when trading in tradable allowances occurs. C) only rarely, that in general, markets cannot maximize social surplus. D) when transaction costs are low and property rights are clearly defined. 8) According to the figure, who bears the greater burden of a commodity tax? A) The buyer and the seller will split the tax burden equally. B) The buyer will bear the greater burden of the tax. C) The government will bear the full burden of the tax D) The seller will bear the greater burden of the tax. 9) The lower the price ceiling is relative to the market equilibrium price, the: A) larger the shortage. B) larger the surplus. C) smaller the shortage. D) smaller the surplus

Explanation / Answer

6. The correct answer is B.

7. The correct answer is D.

8. The correct answer is D.

9. The correct answer is A.

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