When external benefits are present in a market,
a. less of the good will be produced than the amount consistent with economic efficiency.
b. more of the good will be produced than the amount consistent with economic efficiency.
c. the amount of the good produced will be equal to the amount consistent with economic efficiency.
d. corresponding external costs are always generated.
A
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During 2011 the inflation rate in Brazil was about 6.6% while in the U.S. it was about 3.3%. At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S. dollar. If purchasing-power parity holds, about what should the nominal exchange rate have been at the end of 2011? Show your work
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A) more than the social optimum. B) less than the social optimum. C) the social optimum. D) All of the above are possible.