To internalize a negative externality:
a. a producer's costs could be reduced by an amount equal to the external cost resulting from the production of a good.
b. a producer's costs could be increased by an amount equal to the external cost resulting from the production of a good.
c. a producer could receive a subsidy equal to the external cost resulting from the production of a good.
d. None of the above are correct.
Question 2
If the public has correct rational expectations and the Fed increases both reserve requirements and the discount rate, it would be expected to result in:
a. a higher level of real output and a lower price level.
b. a lower price level but no change in real output.
c. a higher price level and a reduced level of real output.
d. a higher price level but no change in real output.
A Negative Afterimage
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