Mary plants a number of trees in her garden every week, which ...

[michelleunicorn]

Mary plants a number of trees in her garden every week, which keeps her neighborhood cool. Which of the following is true?
 
  A) The marginal social cost of planting a tree is lower than the marginal private cost of planting a tree.
  B) The marginal private benefit of planting a tree is higher than the marginal social benefit of planting a tree.
  C) There is an external benefit in planting a tree.
  D) There is a deadweight loss in planting trees.

Question 2

How can performance-based incentives help companies facing moral hazard?
 
  What will be an ideal response?

[Pamela.irrgang@yahoo.com]

Answer to Question 1

C

Answer to Question 2

Moral hazard occurs in a company when employees shirk from their responsibilities. Performance-based incentives encourage workers to work harder because they would lose money by shirking. Thus, performance-based incentives help in solving the problem of moral hazard.