A New Technology Is Discovered Which Results in All New

question 239

Multiple Choice

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

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

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Definitions:

Quantity Demanded

The amount of a good or service that consumers are willing and able to purchase at a given price.

Price Ceiling

A legal limit on how high the price of a product can be charged in the market.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the actual amount they do pay.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual amount they receive by selling it at the market price.