101w07-practice quiz 4-with answers

101w07-practice quiz 4-with answers - expected to be on...

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Economics 101-300 Please make sure to fill in your Answer all of Write your If the question is multiple choice, circle the letter of the answer you believe is correct. For analytical questions, work out your answer on the paper in the space given. We can give partial credit even if the answer is incorrect if we see the work and can figure out where the problem is. Turn in this entire document when you are finished. Take your time, and good luck. Your name___________________________________________ 1) (3 points) Suppose that any time oil companies drill for oil off the Gulf coast, some oil inevitably spills into the water. People want to use those waters for recreational purposes but can’t if they’re highly contaminated. The government is concerned, then, that companies produce more oil than is socially optimal. What can the government do to ensure that the socially optimal level of oil is produced? a) subsidize consumers’ purchase of oil products b) tax consumers’ purchase of oil products c) subsidize firms’ production of oil d) none of the above will work e) all of the above will work b-taxing when there is an externality (Pigouvian taxes) improves efficiency.
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This test prep was uploaded on 04/04/2008 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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101w07-practice quiz 4-with answers - expected to be on...

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