Suppose the Marginal Benefit of Saving One More Spotted Owl

question 15

Short Answer

Suppose the marginal benefit of saving one more spotted owl is $1.2 million, and the marginal cost of saving one more spotted owl is $8 million. Saving one more spotted owl will cause net benefit from saving owls to _______________________(increase, decrease) by $ _______________. In this situation, society is saving ___________________ (too few, too many) spotted owls.

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Definitions:

Autonomous Spending

Spending that does not depend on the current level of national income or output, such as investments, government spending, and exports.

Aggregate Expenditure Line

A graphical representation showing the total planned spending on goods and services at different levels of national income.

Spending Multiplier

A factor by which a change in spending translates into a greater change in income and output throughout the economy.

Price Level

The calculated average price across the broad spectrum of goods and services in an economy.