Suppose That Recycling Rubber for Running Shoes Creates an External

question 31

Multiple Choice

Suppose that recycling rubber for running shoes creates an external benefit of $2.00 per tonne of rubber.There are no external costs.The efficient amount of rubber will be recycled when the government creates a

• A)subsidy of more than $2.00 per tonne of rubber.
• B)subsidy of $2.00 per tonne of rubber.
• C)tax of more than $2.00 per tonne of rubber.
• D)tax of $2.00 per tonne of rubber.
• E)voucher valued at $2.10 a tonne of rubber.

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Definitions:

Corporate Tax Rate

The tax rate that companies are charged on their profits by the government.

Break-Even Lease Payment

The lease payment at which the cost of leasing equals the benefits received, with no net loss or gain from entering into the lease.

Cost of Debt

The effective rate that a company pays on its total debt, representing the interest expense on all outstanding debts.

Marginal Tax Rates

The rate of additional federal income tax that applies to each additional dollar of taxable income, indicating the percentage of tax applied to your income for each tax bracket in which you qualify.