a) The marginal cost of providing a certain quantity of a pure public good to an

Question

a) The marginal cost of providing a certain quantity of a pure public good to an additional consumer after it is provided to any one consumer is:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a.     zero.

b.     positive and increasing.

c.     positive and decreasing.

d.     positive and constant.

         b) The efficient output of a pure public good is achieved at the point at which:

a.     the marginal benefit obtained by each consumer equals the marginal social cost of producing the good.

b.     the sum of the marginal benefits of all consumers equals the marginal social cost of producing the good.

c.     the marginal benefit of each consumer equals zero.

d.     the marginal social cost of producing the good is zero.

e.     both (c) and (d)

c) The principle of non exclusion for pure public goods means that the benefits of the good:

a.     are shared.

b.     can be priced.

c.     cannot be withheld from consumers even if they refuse to pay.

         Q2

            What may be the arguments for and against a gasoline tax? Explain your view points.

Explanation / Answer

a) zero

as a pure public good is non-excludable

b) the sum of the marginal benefits of all consumers equals the marginal social cost of producing the good.

c)cannot be withheld from consumers even if they refuse to pay

For explanation and further information, you may visit :http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=public+goods:+efficiency

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