The Following Questions Refer to the Graph Below

question 29

Multiple Choice

The Following Questions Refer to the graph below.
-Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are negative social spillovers associated with the production of Z,

• A)Government should levy a per unit tax on Z to shift the supply curve toward S₁
• B)An output greater than 0G would improve resource allocation
• C)Government should levy a per unit tax on Z to shift the demand curve toward D₁
• D)An output smaller than 0G would improve resource allocation
• E)Both (a)and (d)

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Definitions:

Factor Model

A way of decomposing the factors that influence a security’s rate of return into common (systematic) and firm-specific influences.

Firm-specific Events

Events that directly affect a company's operations, financial performance, or stock price, independent of the market or economic conditions.

Macroeconomic Events

Large-scale economic events that affect the economy on a national or global level, such as inflation, unemployment, or fiscal policies.

Unsystematic Risk

The segment of risk that is unique to a specific company or industry, also known as diversifiable risk, which can be mitigated through diversification.