An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question:I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water), the more effective the fee will be in reducing effluent.II. The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees.(Hint: See Example 7.4 in the textbook) A.Both I and II are true B.I is true and II is false C.Both I and II are false D.I is false and II is true

The answer is A. Both I and II are true

Answered: one another (for example, capital can…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question:

I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water), the more effective the fee will be in reducing effluent.

II. The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees.

(Hint: See Example 7.4 in the textbook)

A.

Both I and II are true

B.

I is true and II is false

C.

Both I and II are false

D.

I is false and II is true

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