Author Question: The greater the magnitude of the external costs of production, a. The larger is the deadweight loss ... (Read 14 times)

frankwu · **on:** Jun 30, 2018

The greater the magnitude of the external costs of production,
a. The larger is the deadweight loss from overproduction.
b. The greater would be the optimal pollution tax.
c. The further the private market solution ignoring those costs would deviate from the socially efficient level of output.
d. All of the above are true.

Question 2

In the rational expectation model, government control over aggregate demand:
a. gives it the power to alter real output and employment even when the effects of government policies are expected.
b. can affect real output in the short-run only if policies are unexpected.
c. has potential to change long-run real output as long as the aggregate supply curve is vertical.
d. has highly unpredictable effects on real output in the long run.