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:

Prime Rate

The interest rate that banks charge their most creditworthy customers.

Loan Repayment

The process through which a borrower returns borrowed money to the lender, usually in scheduled installments.

Commercial Paper

An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories, and meeting short-term liabilities.

Issue Date

The date on which a document, such as a check, bond, or stock, is issued or goes into effect.