If China Decides to Enact Laws to Clean Up the Environment,what

question 26

Multiple Choice

If China decides to enact laws to clean up the environment,what would be the effect on GDP?

• A)GDP would increase reflecting the fact that the environment would be cleaner.
• B)GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls.
• C)GDP would increase as the citizens of China were made happier as the environment was cleaned up.
• D)GDP would increase as the environmental costs of pollution were not included in the calculation of GDP.

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Definitions:

Cannibalizing

In business, the reduction in sales of a product due to the introduction of a similar product by the same company.

Elastic Demand

A situation where the demand for a product or service significantly changes in response to a change in price, indicating consumers' sensitivity to price changes.

Inelastic Demand

A situation where the demand for a product or service remains relatively unchanged despite changes in its price.

Marginal Cost

The rise in aggregate expenditure resulting from the production of one more unit of a good or service.