Rational Economic Decision Makers Will Make a Change Only If

question 12

Multiple Choice

Rational economic decision makers will make a change only if

• A)the change is free of risk
• B)there are no costs involved
• C)their expectations are correct
• D)there is no uncertainty about the results of the change
• E)the expected marginal benefit exceeds expected marginal cost

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Definitions:

Corrective Tax

A tax designed to induce private decision-makers to take account of the social costs that arise from a negative externality.

Government

The system or group of people governing an organized community, often a state, with the authority to make and enforce laws, policies, and decisions.

Tradable Pollution Permits

A regulatory system that allows companies to buy or sell allowances for a specific amount of pollution, encouraging reduction in overall emissions.

Free Market

An economic system in which prices are determined by unrestricted competition between privately owned businesses.