Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

Profit-maximizing firms enter a competitive market when existing firms in that market have

a. total revenues that exceed fixed costs. b. total revenues that exceed total variable costs. c. average total costs that exceed average revenue. d. average total costs less than market price.

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

A) equal to the marginal external cost at the economically efficient level of pollution. B) equal to the marginal private cost of production at the economically efficient level of pollution. C) equal to the amount of the deadweight loss created in the absence of a pollution tax. D) at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.