Refer to the diagram, in which S is the market supply curve and S is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach Select one: O A. an overallocation of resources to this product. O B. an optimal allocation of society's resources. O C. an underallocation of resources to this product. O D. a higher price than is consistent with an optimal allocation of resources.

Refer to the diagram, in which S is the market supply curve and S is a supply curve comprising all costs of production, including external costs. Assume that the number of people affected by these external costs is large. Without government interference, this market will reach Select one: O A. an overallocation of resources to this product. O B. an optimal allocation of society's resources. O C. an underallocation of resources to this product. O D. a higher price than is consistent with an optimal allocation of resources.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An unregulated paint factory that pollutes a river results in and OO (... OA. the efficient quantity produced; a marginal benefit equal to the marginal social cost OB. underproduction; a price that equals the marginal benefit from the good C. an inefficient quantity produced; a marginal benefit below the marginal social cost O D. overproduction; a price that exceeds the marginal benefit from the good
The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality? O 12 4 8.
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Suppose scientific research generates external benefits. Without government intervention, the market for scientific research would A) produce the efficient amount. B) produce more than the efficient amount. O C) produce some research, but less than the efficient amount. D) produce zero research. E) either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research.
Studies have shown that producing Good X generates pollution that is harmful - even for consumers who may not purchase/consume Good X themselves. If prices for this good are simply determined in a free market, which of the following will occur? O The market price of Good X will be too low and the quantity produced and sold will be too high. The market will be efficient because markets always regulate marginal benefits and marginal costs of all consumers. The market price of Good X will reflect the marginal social benefit received by nonconsumers of Good X. O The market price of Good X will be efficient but the quantity produced and sold will be too high. O The price of Good X will overstate the true external costs imposed on nonconsumers of Good X.
Suppose electricity generates a negative externality in production. If so, then O A. the marginal social benefit of electricity is less than the marginal private benefit. O B. the marginal social cost of electricity equals the marginal private cost. Oc. the marginal social cost of electricity equals the marginal social benefit. O D. the marginal social cost of electricity is less than the marginal private cost. O E. the marginal social cost of electricity is greater than the marginal private cost.
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. Acres 1 2 3 4 5 6 7 Sophia 0 acres O1 acre 2 acres 10 8 6 3 1 O3 acres 0 Willingness to Pay (Dollars) Amber Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" 24 18 14 8 6 4 2 Cedric 6 5 4 3 2 1 0
PRICE (Dollars per unit of electricity) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 1 O 4 5 QUANTITY (Units of electricity) 3 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost ? The market equilibrium quantity is units of electricity, but the socially optimal quantity of electricity production is To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose a unit of electricity. units. of $ per
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2.40 2.00 1.60 1.20 0.80 0.40 0 600 O1200 12000 13000 14000 15000 Supply Demand 16000 If a price ceiling of $0.80 is imposed on this market, what is the dead weight loss? O 400 800