-In the Above Figure, Starting at E1, If There Is

question 20

Multiple Choice

-In the above figure, starting at E1, if there is a supply shock that is permanent, the

• A) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS0.
• B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1.
• C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1.
• D) aggregate supply would shift to SRAS1 and then return to SRAS0.

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Definitions:

Pollution

The introduction of contaminants into the natural environment that cause adverse change.

Socially Optimal Quantity

The level of production that maximizes societal welfare, often considered at the point where marginal cost equals marginal benefit.

Marginal Social Cost

The total cost to society of producing one additional unit, including both private costs and any external costs.

Marginal Social Benefit

The extra advantage to the community that comes from creating or using an additional unit of a product or service.