If some firms internalize their external costs by being a cleaner and more environmentally friendly ...

If some firms internalize their external costs by being a cleaner and more environmentally friendly producers than other firms that do not, then which of the following offers the best and most complete description of this situation?
 a. The environmentally friendly firm will be operating at a higher marginal and average cost than those firms that shift some costs to society in the form of external costs.
  b. In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit.
  c. Without regulations requiring firms to internalize their external costs, producers can only afford to be environmentally friendly if consumers reward them with a price premium.
  d. None of the above is correct.

QUESTION 2

Banks earn a profit on the difference between:
 a. the interest charged from depositors and the interest offered to borrowers.
  b. the interest charged on loans and the interest paid on deposits.
 c. the deposit and loan balances.
 d. liabilities and deposits.
 e. dividends and interest.

QUESTION 3

A decrease in disposable income will:
 a. shift the consumption function upward.
 b. shift the consumption function downward.
 c. cause an upward movement along the consumption function.
  d. cause a downward movement along the consumption function.
  e. make the consumption function flatter.

QUESTION 4

Which of the following best describes social costs?
 a. The external costs borne by other members of society, ignoring the private costs to market participants.
  b. The sum of external costs and private costs.
  c. External costs minus private costs.
  d. Private costs minus external costs.

QUESTION 5

The United Bank of Glassen only lent money to a limited number of big business houses. After a financial crisis, the bank went out of business. Which of the following reasons could have contributed to the collapse of this bank?
 a. Their decision not to lend funds to the Federal Reserve
 b. Their decision not to diversify their asset portfolio
 c. Their decision to extend loans to a diversified pool of borrowers
  d. Their decision to extend mainly short-term loans
 e. Their decision to unnecessarily scrutinize each borrower's details

QUESTION 6

Which of the following is least likely to cause a shift of the consumption function?
 a. A change in the level of saving
 b. A change in consumer expectations about future prices
  c. A change in household wealth
 d. A change in investment spending
 e. A change in the interest rate

QUESTION 7

Negative externalities:
 a. are found only in large cities.
  b. occur whenever individual health is harmed in the production process.
  c. impose most of their costs directly on consumers of polluting processes.
  d. impose most of their costs on individuals other than consumers of the polluting product.

QUESTION 8

Banks help to overcome the problem of asymmetric information by:
 a. lending to a single rich borrower and not diversifying their portfolio.
  b. acquiring expertise in evaluating the credit histories of borrowers.
  c. threatening borrowers.
 d. offering only one type of loan.
 e. providing information to lenders.