Question

25. Too few resources are devoted to the creation of knowledge because profit-seeking firms A) B) C) D) undervalue knowledge in their pursuit of revenues. abuse their patents. tend to free-ride on the knowledge that others have developed. tend to rely on existing employee knowledge. 26. If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set A) B) equal to the marginal external cost at the economically efficient level of pollution. equal to the marginal private cost of production at the economically efficient level of pollution. equal to the amount of the deadweight loss created in the absence of a pollution tax. at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product. D)

Answer 1

Answer 25)  Option C is the correct answer. Too few resources are devoted to research and innovation for knowledge creation because the firms existing in a cluster try to capitalize upon the efforts of other firms. Thereby, free riding on the hard work of others. This is an example of a positive externality.

Answer 26) If the policymakers want to reduce pollution and reach an optimal level of pollution. Then the government should set tax per unit of emission equal to the marginal external cost. Only then the efficient amount of pollution emission can be attained. Hence Option A is the correct answer.

Answer 6) When the tariff is imposed the level of trade declines from 30 (40-10) to 15 (30-15). Hence when tariff is imposed the import of cheese by Canada will decline by 15 million pounds. Option B is the correct answer.

Answer 7) The loss to consumer surplus after the imposition of tariff is area C+D+F+G. Imposition of tariff reduces the consumer surplus because the prices are being raised as compared to the world competitive price. Option C is the correct answer.