Question 1

The benefit the consumer of a good or service receives is the

Accepted Answer

The private benefit is the benefit received by an individual consumer from consuming a good or service. It is called private because it is specific to the individual and is not shared with others.

Question 2

Which of the following is an example of a voucher?

Accepted Answer

Food stamps are a type of voucher that provides individuals with a set amount of money to purchase food.

Question 3

In the figure above,when the market is unregulated and in equilibrium,marginal social cost ________ marginal benefit,and the quantity of chemical produced is ________.

Accepted Answer

The answer of In the figure above,when the market is...

Question 4

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-The figure above shows that the unregulated market equilibrium occurs at a tuition of ________ a year and ________ million students.

Accepted Answer

The unregulated market equilibrium occurs at the intersection of the supply and demand curves. The supply curve is upward sloping, indicating that as tuition increases, more students will be willing to attend college. The demand curve is downward sloping, indicating that as tuition increases, fewer students will be willing to attend college. The equilibrium point is where the supply and demand curves intersect, which is at a tuition of $15,000 and 7.5 million students.

Question 5

Marginal social benefit equals

Accepted Answer

Marginal social benefit includes both the private benefit that an individual receives from consuming a good or service and any external benefits that accrue to society as a whole. Therefore, it is equal to the sum of marginal private benefit and marginal external benefit.

Question 6

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then when the market is in equilibrium,the deadweight loss is ________ per month.

Accepted Answer

When a pollution tax is imposed equal to the marginal external cost, it internalizes the externality, aligning the private cost with the social cost. This leads to an efficient market outcome with no deadweight loss, as the market equilibrium reflects the true cost of production including the externalities.

Question 7

When Ronald takes another economics class,other people in society benefit.The benefit to these other people is called the marginal ________ benefit of the class.

Accepted Answer

The marginal benefit to other people in society is called the external benefit.

Question 8

-The figure above shows the market for annual influenza immunizations the United States.Area A is the

Accepted Answer

Area A represents the gain in efficiency from the subsidy, as it reduces the deadweight loss by increasing the quantity of immunizations closer to the socially optimal level.

Question 9

In the figure above,when the market is unregulated and in equilibrium,the deadweight loss is ________ per month.

Accepted Answer

The answer of In the figure above,when the market is...

Question 10

-The figure above shows the market for annual influenza immunizations the United States.Area B is the

Accepted Answer

Area B represents the remaining deadweight loss when there is the illustrated subsidy.

Question 11

In the figure above,if a pollution tax is imposed that is equal to the marginal external cost of pollution,then at the equilibrium,marginal social cost would ________ marginal benefit,and the quantity of chemical produced would be ________.

Accepted Answer

Imposing a pollution tax equal to the marginal external cost aligns the marginal social cost with the marginal benefit, leading to the production of an efficient quantity of chemicals.

Question 12

The figure above shows the demand for college education (D), the marginal social benefit of college education (MSB), and the marginal cost of the private schools (MC).
-The figure above shows that at the unregulated market equilibrium,marginal social benefit ________ marginal cost,and the number of students enrolled is ________.

Accepted Answer

At the unregulated market equilibrium, MSB (marginal social benefit) is above MC (marginal cost), which means that society values an additional student more than it costs to provide education for them, but the private schools only take into account their own private costs and benefits, resulting in a quantity of students that is below the efficient quantity. Choice B accurately reflects this situation.

Question 13

In an unregulated market with an external benefit,the

Accepted Answer

In an unregulated market with an external benefit, the production level would be less than the efficient quantity. This is because the producer does not take into account the full benefits of production for others in the market, leading them to produce less than what would be socially optimal.

Question 14

-The figure above shows the market for annual influenza immunizations the United States.If the government intervenes in the market and provides a $10 subsidy to providers of immunizations,the number of people immunized is

Accepted Answer

A subsidy lowers the cost for providers, increasing supply and reducing price, leading to more people being immunized, but not as high as 15 million.

Question 15

-The figure above shows the market for annual influenza immunizations the United States.Area A + Area B is the

Accepted Answer

Area A + Area B represents the deadweight loss when there is no subsidy, as it indicates the loss in total surplus due to underproduction of the immunizations without the subsidy.

Question 16

If tuition at a college is $30,000 and the external benefit of graduating from this college is $10,000,then
i.in the absence of any government intervention,the number of students graduating is less than the efficient number.
ii.the government could increase the number of graduates by giving the college a $10,000 subsidy per student.
iii.the government could increase the number of graduates by giving the students $10,000 vouchers.

Accepted Answer

i. The presence of an external benefit means that the social benefit of graduating is higher than the private benefit by $10,000. This discrepancy leads to under-enrollment compared to the socially optimal level, as individuals do not consider the external benefit when deciding whether to attend.ii. A $10,000 subsidy to the college per student effectively lowers the cost of providing education, which can allow the college to reduce tuition or improve quality, making education more attractive to potential students and likely increasing enrollment.iii. A $10,000 voucher to students directly lowers their cost of attending college, making it more financially feasible for more students to enroll, thus increasing the number of graduates.

Question 17

In the figure above,the unregulated market equilibrium occurs at a price of ________ a ton and quantity of ________ tons.

Accepted Answer

The unregulated market equilibrium occurs at the intersection of the supply and demand curves. The supply curve is upward sloping, and the demand curve is downward sloping. The equilibrium price is the price at which the quantity supplied equals the quantity demanded. The equilibrium quantity is the quantity that is bought and sold at the equilibrium price. In this case, the equilibrium price is $100 per ton, and the equilibrium quantity is 4,000 tons.

Question 18

Based on the figure above,if the factory owned the river then at the equilibrium,marginal social cost would ________ marginal benefit,and the quantity of chemical produced would be ________.

Accepted Answer

If the factory owned the river, it would internalize the external costs, leading to a situation where marginal social cost equals marginal benefit, resulting in an efficient quantity of chemical production.

Question 19

An external benefit is a benefit from a good or service that someone other than the ________ receives.

Accepted Answer

The external benefit is received by someone other than the seller of the good or service, which rules out choices A and E. The government and foreign sector are not necessarily involved in every external benefit situation, so they can also be ruled out. The external benefit can be received by individuals or groups who are not directly involved in the transaction, making D the best choice.

Question 20

If an external benefit is present,then the

Accepted Answer

An external benefit exists when a third party benefits from an economic transaction between two parties. In this case, the marginal social benefit (MSB) includes both the marginal private benefit (MPB) experienced by the individual making the transaction and the marginal external benefit (MEB) experienced by the third party. Therefore, the MSB curve lies above the MPB curve. The marginal social cost (MSC) includes both the marginal private cost (MPC) borne by the individual making the transaction and the marginal external cost (MEC) borne by third parties. However, since we are given that the external effect is a benefit and not a cost, the MSC is equal to the MPC since there is no MEC. Thus, the marginal social benefit curve lies above the marginal private benefit curve.

Quiz 10: Externalities