1.

World oil suppliers act as imperfect rather than perfect competitors. Their imperfectly competitive use of market power probably

		reduces the world's total surplus because perfect competition maximizes total surplus.
		reduces the world's total surplus because of negative externalities associated with supplying oil.
		raises the world's total surplus because of positive externalities associated with supplying oil.
		raises the world's total surplus because of negative externalities associated with supplying oil.
		answers a and b are both correct.
		all the other answers are incorrect.

2.

Pick the best answer: In a competitive industry that produces a unit of pollution with every unit of its output, the most efficient tax per unit of output is equal to

		the total damage caused by the pollution at the competitive equilibrium level of output.
		the total damage caused by the pollution at the most efficient level of output.
		the marginal damage (damage of an additional unit of pollution) at the level of output that is produced after the tax is imposed.
		the marginal damage caused by the pollution at the output level produced if there were no tax.
		the private marginal cost of the firm that produces the most pollution.

3.

Pick the best answer: In an industry that produces a unit of pollution with each unit of its output, an excise tax on the output is likely to lead to a more socially efficient output level than a tradable permit system if

		The marginal damage rises rapidly when output varies over a narrow range and the demand curve rarely shifts.
		The marginal damage rises rapidly when output varies over a narrow range and the demand curve often shifts.
		The marginal damage is nearly constant at all levels of output and the demand curve often shifts.
		The marginal damage is negative and the demand curve often shifts.
		An excise tax is unlikely to lead to a more socially efficient output level than a tradable permit system.