The inhabitants of Pandora value their natural environment (e.g., forests, springs, breathable air, etc.) twice as much as the inhabitants of Utopia. Suppose that the value added for all goods and services increases by the same amount in both countries, but has a negative effect on the environment (e.g., pollution).

a) According to the production approach to the measurement of GDP, is this good or bad?

b) Are both countries necessarily better off?

Which country benefits more for sure?

c) The inhabitants of Utopia are very concerned about income distribution, which is not that important for the inhabitants of Pandora. If the increase in value added results in further wealth concentration, how will this affect your answers to part (b)?