Explain the argument for why taxing externalities is an economically legitimate distortion
What will be an ideal response?
The purpose of a tax on externalities is to force decision makers to consider real costs that they otherwise would ignore. In the case of pollution, for example, the distortion caused by a tax is desirable. Instead of causing an excess burden, it results in an efficiency gain.
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Using the equation of exchange, if the nominal GDP is $8,000 billion and the money supply is $1,600 billion, then
A) the price level is 5.0. B) the price level is 0.2. C) velocity is 5.0. D) velocity is 0.2.
The firm becomes the dominant organization type whenever
a. markets exist b. markets don't exist c. the net value of centralized, organized production exceeds the net value of market-arranged production d. the net value of market-arranged production exceeds the net value of centralized, organized production e. private enterprise eliminates shirking