The Government Has Been Trying to Encourage the Use of Fuel-Efficient

question 20

Multiple Choice

The government has been trying to encourage the use of fuel-efficient cars.One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane.This encourages people to use fuel-efficient cars because:

• A) those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
• B) those who place a low value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the speedier separate highway lane.
• C) those who are more concerned about the environment are also those who happen to place a high value on their time.
• D) those who purchase a fuel-efficient car are forced to pay more for a new car, and the use of the separate highway lane compensates them for this.
• E) those who purchase a fuel-efficient car are likely to be unhappy because it is less powerful or more cramped inside; use of the separate highway lane compensates them for this.

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Definitions:

Levered Firms

Companies that use debt in their capital structure alongside equity.

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Companies that operate without the use of borrowed money or debt in their capital structures.

Interest Tax Shield

A reduction in taxable income that results from deducting interest payments, decreasing overall tax liability.

Debt-Equity Ratio

A financial indicator showing the relationship between borrowed funds and equity in a company's asset financing.