Refer to the Information in Figure 16

question 193

Multiple Choice

Refer to the information in Figure 16.5 below to answer the question(s) that follow. Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. The government decides to impose a tax on pollution emissions to cut total emissions in this industry in half, and based on this decision it has set the tax at $100 per ton of emissions. For Alpha, the tax is ________ than the marginal benefit it gets from polluting, and for Beta, the tax is ________ than the marginal benefit it gets from polluting.

• A) higher; higher
• B) higher; lower
• C) lower; higher
• D) lower; lower

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Definitions:

Interest Paid

The amount paid by a borrower to a lender for the privilege of borrowing money, typically expressed as an annual percentage rate.

Effective Interest Rate

The true rate of simple interest.

Contract Interest Rate

The agreed-upon rate of interest that will be charged or paid on a financial contract, such as a loan or bond.

Issued at Discount

When a bond or other security is sold for less than its face value.