Suppose a Particular Production Process Results in a Large Amount

question 161

Multiple Choice

Suppose a particular production process results in a large amount of pollution and the government decides to impose a tax to correct for this externality, such that the socially optimal output will be produced. The tax will have the effect of shifting the

• A)marginal private benefit curve to the right.
• B)marginal social benefit curve to the right.
• C)marginal private cost curve to the left.
• D)marginal social cost curve to the left.
• E)marginal private cost curve to the right.

---

Definitions:

Net Change

The difference in a variable's value between two points in time, indicating increase or decrease.

Utility

A measure of satisfaction or benefit that a consumer derives from the consumption of goods and services.

Behavioral Economics Research

Behavioral economics research studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions and how those decisions vary from those implied by classical theory.

Anchoring Effect

A mental shortcut in which a person gives excessive weight to the first piece of information they receive (known as the "anchor") during decision-making processes.