If some firms internalize their external costs by being a cleaner and more environmentally friendly producers than other firms that do not, then which of the following offers the best and most complete description of this situation?
a. The environmentally friendly firm will be operating at a higher marginal and average cost than those firms that shift some costs to society in the form of external costs.
b. In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit.
c. Without regulations requiring firms to internalize their external costs, producers can only afford to be environmentally friendly if consumers reward them with a price premium.
d. None of the above is correct.
Question 2
Banks earn a profit on the difference between:
a. the interest charged from depositors and the interest offered to borrowers.
b. the interest charged on loans and the interest paid on deposits.
c. the deposit and loan balances.
d. liabilities and deposits.
e. dividends and interest.
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