The Greater the Magnitude of the External Costs of Production

question 138

Multiple Choice

The greater the magnitude of the external costs of production,

• A)​The larger is the deadweight loss from overproduction.
• B)​The greater would be the optimal pollution tax.
• C)​The further the private market solution ignoring those costs would deviate from the socially efficient level of output.
• D)​All of the above are true.

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Definitions:

Wartime Borrowing

The process of governments taking on debt during times of war to finance military operations and support the economy.

Social Security

A government program that provides financial assistance to retirees, disabled individuals, and their dependents.

Cyclically Balanced

A fiscal policy strategy where government budgets are planned to balance over the business cycle, running surpluses in boom years and deficits during recessions.