While Pollution Regulations Yield the Benefit of a Cleaner Environment

question 78

Multiple Choice

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

• A)trade can make everyone better off.
• B)rational people think at the margin.
• C)people face tradeoffs.
• D)people respond to incentives.

---

Definitions:

Financing Pressure

The stress or difficulty a company faces in securing funds to finance its operations or expand its business.

Liquidity

The extent to which an asset or security can be quickly bought or sold in the market without affecting its price.

Payback Period

The number of years it takes a firm to recover its project investment. Payback does not capture a project’s entire cash flow stream and is thus not the preferred evaluation method. Note, however, that the payback does measure a project’s liquidity, and hence many firms use it as a risk measure.

Capital Budget Expenditures

Outlays of funds by a company for major investments or acquisitions intended to drive future growth.