Price 63 Supply (private cost) 42 36 Social value (private value and extemal benefit) 24 15 Demand (private value) 240 420 Quantity Refer to Figure 10-11. Which of the following statements is correct? O a. The private value of the 420 unit of output is $15. O b. The social value of the 420h unit of output is $42. O C. The external benefit of the 420" unit of output is $27. O d. All of the above are correct.

Figure 1. The graph depicts the market for plastic containers. Price 16- 14- 12- 10 8- 6 200 500 650 Social Cost Private Cost Demand Quantity Refer to Figure 1. In order to reach the social optimum, the government could O offer a subsidy of $8 per unit on the production of plastic containers. O impose a tax of $8 per unit on the production of plastic containers. O offer a subsidy of $4 per unit on the production of plastic containers. O impose a tax of $4 per unit on the production of plastic containers.

45 40 35 30 25 20 P ($) Social cost Supply 15 10 Demand 5 0 0 10 20 30 40 50 60 70 80 90 100 wanted to tax or subsidize this good to achieve the Refer to the figure above. If the government socially-optimal level of output, it would Select one: O a introduce a subsidy of $10 per unit. O b. impose a tax of $10 per unit. Oo impose a tax of $15 per unit. Od introduce a subsidy of $15 per unit. 8

2. Consider the following free market. $300 $200 $100 500 1200 Quantity i. Calculate consumer and producer surplus in this market. ii. If the marginal external cost of production is $10, the socially optimal quantity is 400 and the socially optimal price is $205. Show the new consumer and producer surplus and calculate them. Also show the deadweight loss on the graph and calculate it.

Figure 5-1 Price (dollars per vaccination) $60 50 40 400 600 Supply D, Refer to Figure 5-1. The market equilibrium quantity is O 200 O 400 O 600 O > 600 D₂ Quantity (thousands of vaccinations) Figure 5-1 represents the market for vaccinations. Vaccinations are considered a benefit to society, and the figure shows both the marginal private benefit and the marginal social benefit from vaccinations. thousand vaccinations.

11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 Supply Marginal Social. Benefit Demand 300 600 900 1200 1500 1800 2100 2400 In the market depicted above, how large is the deadweight loss from the externality? O a. 1000 O b. 600 O c. 900 O d. 800

Use the figure below to answer the following questions. Price (dollars per uni 25 20 15 10 S 0 50 100 150 200 250 Quantity (unit) Refer to Figure 5.3.1. If the quantity produced is 100, Figure 5.3.1 Select one: O A. marginal social cost exceeds marginal social benefit. OB. deadweight loss is zero. OC. marginal social benefit is minimized. OD. marginal social benefit exceeds marginal social cost. OE. production is efficient.

10. Understanding different policy options to correct for negativeexternalities Carbon dioxide emissions have been linked to degradation of air quality. The following table lists some potential regulations targeting the amount of airbome carbon dioxide. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax. о Public Policy Command-and- Control Policy Tradable Permit System Corrective Subsidy Corrective Тах Trees take carbon dioxide out of the air and convert it to oxygen, so the govemment funds a tree-planting initiative by offering $440 to any citizen who plants a tree. 0 о The government charges factories $440 for every ton of carbon dioxide they emit о о The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere. 0 ° ° о The government limits total carbon-dioxide emissions by all factories to 260,000 tons per ten years. Each…