The definition of economic growth is the annual percentage A) ...

[imowrer]

The definition of economic growth is the annual percentage
 
  A) increase in the per capita real GDP.
  B) increase in the per capita nominal GDP.
  C) increase in the total nominal GDP.
  D) increase in total exports.

Question 2

What is an effluent fee? Graphically, show how an effluent fee can correct an externality.
 
  What will be an ideal response?

[lou]

Answer to Question 1

A

Answer to Question 2

An effluent fee is a charge to a polluter that gives the right to discharge into the air or water a certain amount of pollution. In the above figure, the market solution is point E, with price of P1 and output of Q1. The external cost of the pollution is equal to the distance FE, so an effluent fee equal to FE causes the firms to produce fewer units. The optimum is at E, with price of P, and output of Q.

[imowrer]

Thank you

[lou]

No problemo