If Price-Taking Firms Are Required to Install Wet Scrubbers on Their

question 57

Multiple Choice

If price-taking firms are required to install wet scrubbers on their chimneys to meet EPA regulations and their costs increase as a result, we would expect

• A)demand for the product to fall
• B)the market supply curve to shift to the left
• C)the long-run economic profit of individual firms in the industry to fall
• D)the short-run economic profit of individual firms in the industry to remain unchanged
• E)short-run profits to rise as the industry raises price more than the cost of pollution

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Definitions:

Operating Lease

A lease agreement allowing the use of an asset without transferring the risks and rewards of ownership, typically used for shorter-term leases or assets that are rapidly updated or replaced.

Sales-Type Lease

A lease agreement where the lessor recognizes profit or loss through the sale of an asset under lease as if it were a normal sale.

Residual Value

The estimated amount that an asset will be worth at the end of its useful life.

Perpetual Inventory System

The perpetual inventory system continuously updates inventory records for each purchase and sale, providing a real-time view of inventory levels.