Graph 10-3 This Graph Reflects the Market for Kiwifruit

question 198

Multiple Choice

Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees.
-Refer to Graph 10-3.Assume that the kiwifruit orchardists must purchase a pesticide application permit (the cost for the permit is included in private cost) before spraying their fruit.What criteria should the government use in determining whether or not to issue a permit?

• A)the majority vote of the affected beekeepers should determine whether a permit is issued
• B)as long as the value to consumers of kiwifruit exceeds the cost of kiwifruit (including the external costs), the permit should be issued
• C)as long as kiwifruit orchardists are willing to replace the dead honeybees, the permit should be issued
• D)the permit should not be issued as long as there are identifiable external costs imposed on local beekeepers.

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Definitions:

Eliminate Inflation

The goal of reducing the rate of increase in the general price level of goods and services to zero.

Passive Policy

A government or central bank policy characterized by minimal intervention in the economy.

Anticipated Inflation

The rate of inflation that consumers, businesses, and investors expect to occur in the future.

Congressional Appropriations

The legal process by which the United States Congress allocates federal funds to various government agencies, departments, and programs.