If a power plant that pollutes the air produces $10 million in electricity. It the pollution causes a decline of $100 million to the value of the air we breathe, then this activity will cause a/an in real GDP and a/an _______ in social welfare.

Question

Quizplus · Accepted Answer

Real GDP will increase because the production of electricity is counted as an economic output. However, social welfare will decrease due to the negative externality of pollution, which reduces the value of the air and overall well-being.

If a Power Plant That Pollutes the Air Produces $10