A Pigouvian subsidy leads to a socially efficient outcome by ________
A) raising individuals' marginal benefit from consumption
B) lowering the marginal private cost of production
C) raising the marginal external benefit from consumption
D) lowering the marginal external cost of production
A
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If real GDP grows by 3 percent, the velocity of circulation grows by 4 percent, and the quantity of money grows by 3 percent, then in the long run the inflation rate is
A) 0 percent. B) 7 percent. C) 10 percent. D) 4 percent. E) -4 percent.
Ronald Coase was awarded the 1991 Nobel Prize in Economics primarily for addressing problems related to externalities. Which of the following describes Coase's work?
A) Coase argued that government intervention is necessary to achieve economic efficiency in markets that are affected by externalities. B) Coase proved that a competitive market achieved a greater degree of economic efficiency than a non-competitive market when externalities occur. C) Coase proved that economic efficiency cannot be achieved in a market that is affected by positive or negative externalities. D) Coase argued that under some circumstances private solutions to the problems of externalities will occur.