To maximize welfare in a competitive market that has a negative externality in production, government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good
Indicate whether the statement is true or false
False. The tax should equal the marginal harm of the pollution at the socially optimal quantity of the good.
Economics
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Assume that taxes depend on income. The MPC is 0.8 and t is 0.2. The government spending multiplier is
A. 1.25. B. 2.78. C. 4. D. 4.17.
Economics
Assume that Krystal has positive wealth. As the interest rate increased, Krystal increased her current consumption. For Krystal
A. the substitution effect of an interest rate increase outweighs the income effect. B. the income effect of an interest rate increase outweighs the substitution effect. C. the income effect of an interest rate increase must equal the substitution effect. D. the substitution effect of an interest rate increase must be zero.
Economics