A Subsidy to Firms Intended to Reduce Pollution in an Industry

question 87

Multiple Choice

A subsidy to firms intended to reduce pollution in an industry would

• A)shift the LRAC curve upward.
• B)have the same impact on the firm as a tax.
• C)likely drive some existing firms from the industry.
• D)likely have the paradoxical effect of increasing pollution in the industry in the long run.

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Definitions:

Consolidation

The process of combining two or more entities into a single entity, often with the goal of improving efficiency or reducing costs.

Assets and Liabilities

The items a company owns (assets) and the debts it owes (liabilities), fundamental components of a company's financial health.

Tender Offer

An offer to purchase made by one company directly to the shareholders of another (target) company; often referred to as a “takeover bid.”

Target Company's Management

The executive and senior officers responsible for operating and making strategic decisions for a company that is being considered for acquisition or merger.