Author Question: What costs associated with the new auto-emission standards arise from decisions made in ... (Read 65 times)

justinmsk · **on:** Jun 29, 2018

What costs associated with the new auto-emission standards arise from decisions made in self-interest and in the social interest?

What will be an ideal response?

Question 2

Refer to Figure 15-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, the Federal Reserve would most likely

A) increase the inflation rate. B) decrease interest rates.
C) not change interest rates. D) increase interest rates.

lgoldst9 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Automobile producers and buyers make their decisions in pursuit of their own self-interest but achieving new emission standards requires more costly engines and emission control technologies, which in turn means the cost of producing automobiles and their prices will rise. President Obama's decision to impose the new regulations is intended to serve the social interest, so all the costs associated with the new emissions standard regulation arise from this decision made in the social interest.

Answer to Question 2

D