CON 260 Figure#3: The Impact of Externality from a Producer Price 8.5 7.5 6.5 So

Question

CON 260 Figure#3: The Impact of Externality from a Producer Price 8.5 7.5 6.5 Social Cost 5.5 4.5 Private Cost 3.5 2.5 Demand 100 200 300 400 500 600 700 800 900o Quantity Refer to Figure a. 200 units. what is the socially-optimal quantity of output in this market? d. Between 500 and 650 units b. Between 200 and 450 units. c. 500 units. pti al level of output, how lange 33. Refer to Figure#3 lft egovemment wanted would the per unit tax nced to be? ternalize the externality to achieve the socially $2, b.Less than S2. &. More than S2. d.The size of the subsidy cannot be determined from the figure. 34. Refer to Figure "3. If the government wanted internalize the externality to ackieve the socially-optimal level of output, how much is the tax revenue? a. $500. b $1000 $$1500. d. The size of the tax revenue cannot be determined from the figure 35. A private good is both rivalry in consumption and excladable, which of the following would NOT be considered a private good? a. pizza. b. I-phone &. e. freach fries d. a hiking trail 36. Goods that are meither excladablke nor rival in consumption would be considered public goods. Which of the following would be considered a public good? a. national park. b. TV or internet cable hiking trail. e, a bieycle d. a boat 37. Goods that are both non-excludable and rival in consumption would be considered c goods is a common resource? a national defense. c. a private resource. Which of the following b. cable TV service. d. long leg crabs in the occan 38. Fire protection is a good example of a natural monopoly or club good because a. protecting one house is unlikely to reduce the protection available to others b. it is rival in consumption. c. it is non-excludable. d. All of the above are correct. RMUNNICHA

Explanation / Answer

Q32-34 are answered below

32.

Correct option: 500 units

Reason: It is the point of intersection of social cost and demand curve

33.

Correct option: $2

Reason: Externality cost = tax to be imposed = Social cost - private cost = $5 - $3 = $2

34.

Correct option: $1000

Reason: Tax revenue = tQ = 2(500) = $1000

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