If net taxes increase by $100 billion and the marginal propensity to consume is 0.6, by how much will GDP change?

The biggest difference between using a Pigovian tax or a tradable allowance to correct for a negative externality is:

A. the tax creates an efficient outcome, and the tradable allowances do not. B. the government collect revenues from the tax, and the private parties trade quota rights on their own. C. the tax maximizes total surplus, but the tradable allowances do not. D. All of these are differences between the two government policies.

J.T. Smith runs Game maker, an equipment producer for gaming service corporations. As CEO, Smith is seemingly worth $2.5 million per year in the marketplace. The directors are attempting to decide how to divide his compensation package between cash salary and perquisites. Using budget constraints and indifference curves, illustrate the potential outcomes for the board of directors.

What will be an ideal response?