The cost of running an electrical utility includes costs for fuel, labor, and capital. In addition, there are sometimes costs associated with pollution from the utility, such an increased health care costs for people living near the utility. To an economist, the costs associated with the pollution resulting from additional electricity are:
A. marginal social costs.
B. marginal private costs.
C. the sum of marginal social costs and marginal private costs.
D. the difference between marginal social costs and marginal private costs.
Answer: D
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Equilibrium GDP is equal to
A) autonomous expenditure times the multiplier. B) autonomous expenditure times the marginal propensity to consume. C) autonomous expenditure times the marginal propensity to save. D) autonomous expenditure.
One reason why the government may not choose to close a recessionary gap by raising both taxes and spending and thereby keeping the budget balanced is because it
a. leaves undone the problem of unemployment b. can create inflation c. may involve raising taxes too high for political comfort d. eventually leads to deficit budgets e. does not impact on aggregate demand which is where the problem lies