Deck 13: Externalities and Public Goods

Question 1

Three hundred paper mills compete in the paper market. The total cost of production (in dollars)for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula . Find the market supply curve.

A)
B)
C)
D)

Answer 1

Question 2

Three hundred paper mills compete in the paper market. The total cost of production (in dollars)for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula . Find the competitive price.

A) $1,400
B) $920
C) $7,000
D) $1995

Answer 2

$1,400

Question 3

Three hundred paper mills compete in the paper market. The total cost of production (in dollars)for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula . Find the competitive quantity.

A) 108,000
B) 60,000
C) 500
D) 0

Answer 3

60,000

Question 4

Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula . Find the function for the marginal social cost.

A)
B)
C)
D)

Question 5

Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula. . Find the competitive price that would prevail without externalities

A) $1,400
B) $1657.14
C) $685.71
D) $1,200

Question 6

Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula , where Q^mill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula . Finally, annual market demand (in thousands of tons) is given by the formula. . Find the efficient quantity that involves no externalities

A) 34,286
B) 60,000
C) 1,200
D) 90,000

Question 7

Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are in dollars. For any given volume, D, your neighbor's benefit is and your cost is . Find the efficient volume, D.

A) 90
B) 95
C) 115
D) 345

Question 8

Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels,B for his benefits and C for your costs, where B and C are in dollars. For any given volume, D, your neighbor's benefit is and your cost is . What is your marginal cost at the socially efficient noise level?

A) $0.75
B) $0.29
C) $0.24
D) $0.25

Question 9

Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are in dollars. For any given volume, D, your neighbor's benefit is and your cost is . What is the efficient Pigouvian tax?

A) $0.75 per decibel
B) $0.29 per decibel
C) $0.24 per decibel
D) $0.25 per decibel

Question 10

Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are in dollars. For any given volume, D, your neighbor's benefit is and your cost is . With an efficient Pigouvian tax, what noise level will your neighbor choose?

A) 90 decibels
B) 95 decibels
C) 115 decibels
D) 345 decibels

Question 11

Your neighbor likes to blast 1970's rock music and the louder the better. The loud music imposes a cost on you because it disrupts your study of economics. Let D stand for the volume of his music in decibels, B for his benefits and C for your costs, where B and C are in dollars. For any given volume, D, your neighbor's benefit is and your cost is . With an efficient Pigouvian tax, how much will your neighbor pay in taxes in total?

A) $22.50
B) $23.75
C) $28.75
D) $71.25

Question 12

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. Find the marginal social benefit function.

A)
B)
C)
D)

Question 13

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. What is the socially efficient level of security?

A) 15 person-hours of patrols per week
B) 7 person-hours of patrols per week
C) 8 person-hours of patrols per week
D) 16 person-hours of patrols per week

Question 14

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. If each store provided security independently, how much would each store purchase?

A) 15 person-hours of patrols per week
B) 7 person-hours of patrols per week
C) 8 person-hours of patrols per week
D) 16 person-hours of patrols per week

Question 15

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. Find the marginal social benefit function.

A)
B)
C)
D)

Question 16

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. What is the socially efficient level of security (rounded to the nearest whole number)?

A) 88 person-hours of patrols per week
B) 168 person-hours of patrols per week
C) 22 person-hours of patrols per week
D) 97 person-hours of patrols per week

Question 17

Four stores have a problem with theft and security is a public good. Let S stand for the number of personhours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula . Patrols cost $25 per hour. If each store provided security independently, how much would each store provide (rounded to the nearest whole number)?

A) 88 person-hours of patrols per week
B) 168 person-hours of patrols per week
C) 22 person-hours of patrols per week
D) 97 person-hours of patrols per week