An Effluent Fee Is Imposed on a Steel Firm to Reduce

question 154

Multiple Choice

An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question: I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water) , the more effective the fee will be in reducing effluent.
II) The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees.

• A) Both I and II are true.
• B) I is true, and II is false.
• C) I is false, and II is true.
• D) Both I and II are false.

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