Question 1

Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.Then,the market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

The answer of Using the figure above,suppose a subsidy of...

Question 2

Using the figure above,suppose education is provided by public colleges.At what level should tuition be set to ensure the efficient number of students?

Accepted Answer

The answer of Using the figure above,suppose education is provided...

Question 3

A competitive,unregulated market would

Accepted Answer

Both A and B are correct because they describe situations where externalities (costs or benefits not reflected in market prices) lead to market failures. Pollution is an external cost not accounted for by the market, leading to overproduction of polluting goods. Education provides external benefits beyond the individual, leading to underproduction in an unregulated market.

Question 4

Discuss the difference between a private cost and a social cost.

Accepted Answer

The answer of Discuss the difference between a private cost...

Question 5

An externality can be a cost or benefit arising from the production of a good that falls upon

Accepted Answer

An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit. Therefore, it falls upon someone other than the consumer or producer.

Question 6

When people decide whether or not to get a flu vaccination,they ignore the ________ and as a result ________.

Accepted Answer

When people decide whether or not to get a flu vaccination, they ignore the external benefit, which refers to the positive impact their vaccination has on others by reducing the spread of the flu. As a result, too few vaccinations are given, leading to more people getting sick and potentially spreading the virus to others. Therefore, increasing awareness of the external benefit of flu vaccinations is important in encouraging more people to get vaccinated.

Question 7

Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

When a subsidy is provided, it lowers the cost of attending private colleges, which can lead to an increase in enrollment. In equilibrium, the marginal social benefit of education equals the marginal social cost, indicating an efficient allocation of resources. Thus, with the subsidy, the market can reach an efficient equilibrium where the number of students enrolled matches the socially optimal level.

Question 8

When a forest is logged,it is possible for the logging to create "soil runoff," a situation in which the soil,no longer protected by trees,erodes and silts a river miles downstream from the logging area.Is soil runoff created by logging in Montana that ruins a river an example of a private cost to the lumbering company or an external cost?

Accepted Answer

The answer of When a forest is logged,it is possible...

Question 9

Externalities

Accepted Answer

Externalities refer to the unintended effects of production or consumption activities on third parties who are not directly involved in the activity. These effects can be positive or negative and may have an impact on the environment or education, making option A the correct choice. Option B is incorrect because externalities can be either positive or negative. Option C is incorrect because externalities arise from economic activities within a society. Option D is incorrect because externalities affect third parties, not just those responsible for production. Option E is incorrect because unregulated competitive markets may lead to negative externalities.

Question 10

Using the figure above,suppose education is provided by public colleges,where tuition is set at $10,000 a year.Then,________ million students are enrolled,and the taxpayers cover ________ of marginal cost per student.

Accepted Answer

The answer of Using the figure above,suppose education is provided...

Question 11

A noisy party that keeps neighbors awake is an example of a

Accepted Answer

A noisy party that disturbs neighbors is an example of a negative consumption externality because it is a negative effect experienced by others who are not part of the consumption activity (in this case, the party).

Question 12

In the figure above,suppose the government provides vouchers worth $15,000 per student per year.Then the market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

The answer of In the figure above,suppose the government provides...

Question 13

What is marginal external cost? Give an example.

Accepted Answer

The answer of What is marginal external cost? Give an...

Question 14

Explain the difference between a negative production externality and a negative consumption externality.

Accepted Answer

The answer of Explain the difference between a negative production...

Question 15

Using the figure above,suppose education is provided by public colleges,where tuition is set at $10,000 a year.When the market is in equilibrium,the marginal social benefit is ________,the marginal cost is ________,and the number of students enrolled is ________.

Accepted Answer

The answer of Using the figure above,suppose education is provided...

Question 16

When property rights are assigned and transactions costs are low,

Accepted Answer

When property rights are assigned and transactions costs are low, the transacting parties are able to take into account all costs and benefits associated with the transaction. This leads to an efficient outcome, as both parties are able to negotiate a price that reflects the true value of the property.

Question 17

In the figure above,suppose a subsidy is provided to private colleges.What amount of subsidy will ensure the efficient number of students?

Accepted Answer

The efficient number of students is where the marginal social benefit (MSB) equals the marginal social cost (MSC). In this case, that is at 60 students. To determine the subsidy amount needed to get to this efficient level, we need to calculate the gap between the private marginal cost (PMC) and the social marginal cost (SMC) at 60 students. From the graph, we can see that the PMC at 60 students is $15,000, and the SMC at 60 students is $25,000. Therefore, the gap is $10,000. This means that a subsidy of $10,000 is needed to get private colleges to produce the efficient number of students. Choice C is the only option that matches this amount.

Question 18

In a market with an external cost,government action

Accepted Answer

When there is an external cost in a market, the market price does not reflect the full cost to society, leading to inefficiency. Government action, such as imposing a tax or regulation, can internalize the cost and help to achieve an efficient outcome. However, it may not completely eliminate the deadweight loss from the external cost. It can also potentially alter firms' cost curves. Therefore, answers A and C are incorrect and answer B is the best choice.

Question 19

Which of the following is true?
I.In an unregulated market with an external benefit,consumers don't take it into account and consume less than the efficient quantity.
Ii.Marginal social cost equals marginal private cost minus marginal external cost.
Iii.An unregulated market produces more than the efficient quantity of a good with an external cost.

Accepted Answer

Statement i is true as consumers do not account for external benefits in their consumption decisions, resulting in a lower consumption level than the socially efficient level.

Statement ii is true as the marginal social cost is equal to the sum of the marginal private cost and the marginal external cost, which can be expressed as MSC = MPC + MEC.

Statement iii is false as an unregulated market can produce less than or more than the efficient quantity of a good with an external cost, depending on whether the external cost is positive or negative.

Question 20

In the figure above,suppose the government provides vouchers worth $15,000 per student per year.When the market is in equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

When the market is in equilibrium and the government provides vouchers, it is assumed that the intervention aligns the private market with the social optimum. Therefore, marginal social benefit equals marginal cost, and the number of students enrolled is at the efficient quantity.

Quiz 9: Externalities: Pollution, education, and Health Care

Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.Then,the market equilibrium occurs at a tuition of a year and million students.

Using the figure above,suppose education is provided by public colleges.At what level should tuition be set to ensure the efficient number of students?

A competitive,unregulated market would

Discuss the difference between a private cost and a social cost.

An externality can be a cost or benefit arising from the production of a good that falls upon

When people decide whether or not to get a flu vaccination,they ignore the and as a result .

Using the figure above,suppose a subsidy of $15,000 per student is provided to private colleges.When the market is in equilibrium,marginal social benefit marginal cost,and the number of students enrolled is .

Externalities

Using the figure above,suppose education is provided by public colleges,where tuition is set at $10,000 a year.Then, million students are enrolled,and the taxpayers cover of marginal cost per student.

A noisy party that keeps neighbors awake is an example of a

In the figure above,suppose the government provides vouchers worth $15,000 per student per year.Then the market equilibrium occurs at a tuition of a year and million students.

What is marginal external cost? Give an example.

Explain the difference between a negative production externality and a negative consumption externality.

Using the figure above,suppose education is provided by public colleges,where tuition is set at $10,000 a year.When the market is in equilibrium,the marginal social benefit is ,the marginal cost is ,and the number of students enrolled is .

When property rights are assigned and transactions costs are low,

In the figure above,suppose a subsidy is provided to private colleges.What amount of subsidy will ensure the efficient number of students?

In a market with an external cost,government action

In the figure above,suppose the government provides vouchers worth $15,000 per student per year.When the market is in equilibrium,marginal social benefit marginal cost,and the number of students enrolled is .