A New Technology Is Discovered Which Results in All New

question 62

Multiple Choice

A new technology is discovered which results in all new cars producing 50 per cent less pollution.Which of the following is true?

• A)GDP increases anytime pollution is reduced.
• B)GDP will increase to reflect the fact that the air we breathe is cleaner.
• C)GDP will increase if there is an increase in the production cost and price of the car.
• D)Real GDP increases because the air is cleaner,but nominal GDP does not change since air is free.
• E)GDP will decrease.

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Definitions:

Coase Theorem

An economic theory stating that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own.

Director of Housing

A position responsible for overseeing housing programs, policies, and services, typically within a governmental or nonprofit organization.

Marginal Benefit (MB) Curves

Graphs that show the additional benefit received from consuming one more unit of a good or service.

Law of Diminishing Marginal Utility

The Law of Diminishing Marginal Utility states that as a person consumes more of a product, the satisfaction (utility) gained from consuming each additional unit decreases.