Assume the price elasticity of demand for a good is -3. In this case, a decrease in price would result in marginal revenue of (2/3)P

Exhibit 16-6 Money, investment and product markets In Exhibit 16-6, if the interest rate falls from i1 to i2, then:

A. the quantity demanded of investment increases from I1 to I2 and investment spending shifts the aggregate demand curve from AD2 to AD1, decreasing the level of real GDP. B. the quantity demanded of investment increases from I1 to I2 and investment spending shifts the aggregate demand curve from AD1 to AD2, increasing the level of real GDP. C. the quantity demanded of investment decreases from I2 to I1 and investment spending shifts the aggregate demand curve from AD1 to AD2, decreasing the level of real GDP. D. the quantity demanded of investment decreases from I2 to I1 and investment spending shifts the aggregate demand curve from AD2 to AD1, increasing the level of real GDP.

When external costs are present,

A. There is government failure. B. The market conveys the full costs of production. C. Private costs are greater than social costs. D. There is market failure.