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:

Treasury Stock

Shares that were issued and subsequently reacquired by the company. They are held in the company’s treasury and can be reissued or retired.

Common Stock

Equity ownership in a corporation, representing a claim on its dividends and assets, typically granting voting rights.

Shares Outstanding

The total number of shares of a company that have been issued and are currently held by investors.

Stated Value

The nominal value assigned by a corporation to its issued shares, which might not reflect the market value but is used for internal accounting.