The government of a country intends to limit pollution by issuing factories tradable permits to pollute. In order for this pollution market to function successfully, the government must:

• A.Mandate that the most efficient companies completely eliminate pollution.
• B.Prevent the trading and selling of pollution credits between companies.
• C.Determine the desired level of total pollution from the factories.
• D.Decide the equilibrium price of a unit of pollution.

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Which of the following options is an example of an implicit transaction?

• A.An invoice for services provided by the pension fund administrator
• B.A depreciation expense for an asset placed in service eight months ago
• C.An invoice for an item of plant equipment that was just purchased
• D.A sales order from a customer for a product to be shipped in two weeks

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The following regression equation shows the relationship between the cost of homeowner's insurance and two variables: the home's distance from the waterfront (in miles) and the amount spent on the home's security system (in dollars).
Cost of Homeowner's Insurance = 3,000 - 300*(distance from waterfront) - 10*(amount spent on security systems)
Which of the statements below accurately describes this relationship?

• A.Provided the distance from the waterfront remains constant, for each additional dollar spent on a security system, the cost of homeowner's insurance increases by $10 on average.
• B.Provided the amount spent on security systems remains constant, for each additional mile a house is from the waterfront, the cost of homeowner's insurance decreases by $300 on average.
• C.For each additional mile a house is from the waterfront, the cost of homeowner's insurance decreases by $300 on average.
• D.As a house's distance from the waterfront increases by 300 miles, the amount spent on security systems decreases by $10 on average.

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A producer of high-end watches has a willingness to sell of $1,000. After a recession occurs, willingness to pay (WTP) for high-end watches drops to $900. What could the watch producer do to raise WTP for its good? (Select all that apply.)

• A.Advertise in a high-end department store's catalog
• B.Add a new feature to the watch
• C.Design a new watch based on watches sold by competitors
• D.Lower the price for the watch
• E.Raise the price for the watch

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The only bakery in a small town has introduced a new type of cookie and is not sure what demand for the cookie looks like. How could the bakery determine the marginal revenue earned by each additional cookie produced?

• A.Decrease the price by small increments and observe the corresponding changes in quantity sold and revenue
• B.Increase advertising to raise demand and sell more cookies
• C.Conduct a focus group to determine how sensitive customers are to price changes
• D.Ask customers to fill out a survey about how a change in price would affect their purchasing decisions

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