If the Owners of SUVs Are Not Forced to Compensate

question 129

Multiple Choice

If the owners of SUVs are not forced to compensate the people affected by their pollution, the market result will be

• A) a lower equilibrium price.
• B) a higher level of demand.
• C) a price that is too low and too many SUVs being driven.
• D) a price that is too high and too few SUVS being driven.
• E) impossible to determine from the information provided.

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Definitions:

Quasilinear Preferences

Preferences represented by utility functions where the marginal utility of consumption is constant irrespective of other goods consumed.

Indifference Curves

Graphical representations of different combinations of goods or services among which a consumer is indifferent, showing no preference for one combination over another.

Perfect Substitutes

Products or services that can be used in exactly the same way by the consumer and that are perceived as identical in satisfying an individual's needs or desires.

Perfect Complements

Goods that are consumed together in fixed proportions to fulfill a specific utility.