December 2020

Is talking about an economically efficient (sometimes labeled “optimal”) level of pollution paradoxical? Explain. What is the Coase theorem? Why do the parties involved in an externality have an incentive to reach an efficient solution?

Mario has chosen Virgin Media as his TV and Internetprovider. Subscribing to it allows Mario to get access to content from Sky Sports channels and watch the English Premier League (EPL) football matches. The subscription price to the football premium channels is in addition to the fee paid for the standard Virgin Media package. Mario

New York City officials believed they needed more revenue to maintain 35 city-owned recreation centers. To raise the additional revenue, the city’s parks department increased the annual membership fee to use the centers from $75 to $150. According to an article in the New York Times, “the department had hoped to realize $4 million in new

Explain the circumstances under which it is advantageous to set up a business as a sole proprietorship. Are those circumstances different from those favoring a corporation set-up? Briefly explain.

Unlike in the United States, in Italy many firms employfewer than 10 people. Would this imply that tax exemptions for small businesses are more effective in stimulating the Italian economy than in the United States?

An article discussing the reasons that the Connecticut state legislature passed a general incorporation law observes that prior to the passage of the law, investors were afraid that large businesses “were not a safe bet for their money.” Briefly explain the author’s reasoning.

Small firms represent a more vital resource for the future growth prospects of an economy than large f irms do. What would you infer from such a statement?

Why is a bond considered to be a loan but a share of stockis not? Why do corporations issue both bonds and shares of stock? How do the stock and bond markets provide information to businesses? Why do stock and bond prices change over time?

If you deposit $20,000 in a savings account at a bank, you might earn 1 percent interest per year. Someone who borrows $20,000 from a bank to buy a new car might have to pay an interest rate of 6 percent per year on the loan. Knowing this, why don’t you just lend your money

The first discussion of comparative advantage appears in On the Principles of Political Economy and Taxation, a book written by the British economist David Ricardo in 1817. Ricardo provided a famous example of the gains from trade, using wine and cloth production in Portugal and England. The following table is adapted from Ricardo’s example, with