The Figure Given Below Shows the Demand and Supply Curves

question 65

Multiple Choice

The figure given below shows the demand and supply curves of automobiles.Figure 13.3
In the figure,
D: Demand curve of automobiles
S: Supply of automobiles prior to the tax
S+t: Supply of automobiles after the tax

-Suppose that the current price of a marketable permit to emit one ton of gunk is $60. For firm A, the marginal cost of reducing one ton of gunk is $50. For firm B, the marginal cost of reducing one ton of gunk is $70. Under a marketable permit system, _____.

• A)both firms will buy a permit and emit one more ton of gunk
• B)firm A will buy a permit and emit one more ton of gunk, whereas firm B will reduce its emissions of gunk by one ton
• C)firm B will buy a permit and emit one more ton of gunk, whereas firm A will reduce its emissions of gunk by one ton
• D)both firms will reduce their emissions of gunk by one ton
• E)both firms will go out of business

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Definitions:

Lawful Purpose

A lawful purpose is an action, contract, or transaction that is not in violation of any legal statutes or regulations.

Quantum Meruit

Quantum meruit is a legal principle allowing a party to recover the reasonable value of services provided, even in the absence of a formal contract.

Promissory Estoppel

A legal doctrine preventing a person from going back on a promise, even if it was made without formal consideration, when others have relied on that promise to their detriment.

Quasi Contracts

Contracts imposed by courts to avoid unjust enrichment or unfair benefit, despite there being no formal agreement between the parties.