​A Rain Barrel Is a Container That Captures and Stores

question 119

Multiple Choice

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. If the government offers a per unit subsidy on rain barrels equal to the per-unit externality, then

• A)​the after-subsidy equilibrium quantity of rain barrels will be less than the socially optimal quantity of rain barrels.
• B)​the after-subsidy equilibrium quantity of rain barrels will be more than the socially optimal quantity of rain barrels.
• C)​the after-subsidy equilibrium quantity of rain barrels will equal the socially optimal quantity of rain barrels.
• D)​market incentives will be distorted and move the allocation of resources away from the social optimum.

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Definitions:

Variables

Represent characteristics or quantities that can change and have different values for different individuals or objects in a study.

Nonlinear Relationship

Relationship between variables not appropriately represented by a straight line.

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Individuals who teach courses or are involved in academic research at a college or university.

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