Suppose people value clean air more as their incomes increase, then
A) the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality.
B) the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality.
C) the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality.
D) the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality.
Answer: C
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The IS—LM model predicts that a temporary beneficial supply shock
A) increases output, national saving, and investment, but not the real interest rate. B) increases output, national saving, and the real interest rate, but not investment. C) increases the real interest rate, investment, and output, but not national saving. D) increases output, national saving, investment, and the real interest rate.
Which of the following will NOT cause market supply to increase?
A) an increase in the number of firms supplying the product in the market B) a change in technology which allows a larger level of production at every price C) an increase in the costs of resources used to produce the product D) a decrease in labor costs
If social cost exceeds private cost, there is
A) underproduction of a good. B) a negative externality. C) a positive externality. D) too little economic profit in the activity.
The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that
A. the government gains more control over the economy. B. floating exchange rates impose risks on importers and exporters from unpredictable exchange rates. C. exchange controls become unnecessary. D. fiscal and monetary policy can focus more on domestic conditions.