If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit
A) the good should be taxed.
B) permits should be required to purchase the good.
C) the good could be subsidized.
D) the government needs to take no action.
C
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In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium quantity is 100 tons. If the government then imposes a price support of $5 per ton,
A) a deadweight loss is created. B) the market becomes more efficient. C) consumer surplus increases. D) producers' economic profits increase. E) None of the above answers is correct.
Explain the argument for why taxing externalities is an economically legitimate distortion
What will be an ideal response?
During a boom, the actual rate of unemployment will be
What will be an ideal response?
To reach general equilibrium, the price level adjusts to shift the ________ until it intersects with the ________
A) IS curve; FE line and LM curve B) FE line; LM and IS curves C) LM curve; FE line and IS curve D) ND curve; FE line and NS curve