Question 1
When the government pays part of my university education, it is
◦ internalizing an external cost.
◦ using taxes to discourage an external cost.
◦ subsidizing an external benefit.
◦ using direct regulation to discourage an external cost.
Question 2
Refer to the data provided in Table 16.1 below to answer the following question(s).
Table 16.1 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Refer to Table 16.1. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade permits, what is the total cost of the pollution reduction?
◦ $30
◦ $55
◦ $58
◦ $130
a) Lunge with your legs open to the table. b) Avoid lunging with your legs close to table.
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