If the External Costs of Carbon Emissions Were Included in the Industry

question 60

Multiple Choice

If the external costs of carbon emissions were included in the industry supply curve:

• A) the supply curve would shift to the right decreasing the price and increasing the output.
• B) the supply curve would shift to the left increasing the price and increasing the output.
• C) the supply curve would shift to the left increasing the price and reducing the output level.
• D) the supply curve would shift to the right increasing the price and reducing the output.

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Definitions:

Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.

Variance

A measure of the dispersion of a random variable. Equals the expected value of the squared deviation from the mean.

Fairly-Priced Securities

Securities that are believed to be priced appropriately according to their risk level and the expected rate of return.

Positive Betas

A term referring to financial securities that have a beta greater than zero, indicating that their returns generally move in the same direction as the market.