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2 points 8
2 points 8. In a free-market economy, an increase in the market price of a good will: Always lead to more resources O being allocated to production of the good. O Always lead to a fall in the output of the good. O Provide information which will influence the production and consumption decisions of producers and consumers. O Make it less likely that new suppliers will enter the industry.
9. If the government wishes to 2 points increase economic welfare by introducing policies that create external benefits as well as internal ones, it should: * O Raise the price of unleaded fuel. O Increase the highest rates of income tax. O Increase the school - leaving age. O Impose higher taxes on polluting producers
Expert Solution
8. Option 3
An increase in price reflects the increase in quantity demanded which would reflect on the consumption and production patterns
9. Option 4
By taxing pollutants, the negative externalities reduces, which would increase the external and internal benefits. The increase in taxes demotivates firms from producing more, thereby increases economic welfare.
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