Suppose There Will Be Global Catastrophe Unless We Hold Total

question 161

Multiple Choice

Suppose there will be global catastrophe unless we hold total carbon dioxide emissions at or below 35 million tons per year. As a result, each person on Earth is allocated 10 pounds of untradable emissions permits per year. Why would this be an inefficient solution?

• A) Flexibility is not desirable.
• B) Transaction costs are very high.
• C) Everybody has the same cost of emissions abatement.
• D) Different people have different costs of emissions abatement.

---

Definitions:

R&D

Research and Development (R&D) refers to the activities companies undertake to innovate and introduce new products and services.

Investment Opportunities

Prospects or options available for investors to put their money into securities, assets, or projects expected to yield a return over time.

Dividend Policies

Dividend policies are guidelines a company follows to decide the size and pattern of cash dividends to its shareholders over time.

Stock Splits

A corporate action to increase the number of outstanding shares, thereby reducing the price per share, without changing the market cap.