In the presence of pollution, social welfare is maximized by
A) reducing output and pollution until marginal benefit of less pollution is equal to the marginal cost of less output.
B) reducing output and pollution until the benefit curve (of less pollution) and cost curve (of less output) intersect.
C) reducing output and pollution until the benefits of pollution reduction just cover the costs of output reduction.
D) None of the above.
A
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According to Ricardian Equivalence theory, a tax cut ________
A) will tend to have little economic effect B) will tend to reduce the magnitude of the trade-off between inflation and the rate of unemployment C) can be an effective policy tool in the midst of an economic downturn D) must be used in conjunction with money supply changes over the course of the business cycle
Positive incentives: a. increase benefits or reduce costs
b. decrease the amount of affected behaviors. c. increase the amount of affected behaviors. d. Do both a. and c.