Exam 4: B: Market Failures: Public Goods and Externalities

Answer the next question on the basis of the following information is for public good.P_a and P_b represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of a quantity (Q_c) of the public good.Q_s represents the quantity of the public good supplied by government at each of the collective prices.If only 1 unit of this public good is produced, then the marginal benefit is:

Refer to the diagrams below in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it.If the marginal cost of the optimal quantity of this public good is $10, the optimal quantity must be:

A negative externality or external cost occurs when:

A public good:

Refer to the supply and demand graph for a public good.Line segment ad represents the amount at Q₁ by which the:

The following information is for a public good.P_a and P_b are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it.These people are the only two members of society.Refer to the data below.If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be:

Cost-benefit analysis attempts to:

In which of the following ways does the government of a nation estimate the true demand for a public good?

With MB₁ and MC₁, society's optimal amount of pollution moderation is:

Answer the question based on the following information.Way-Below Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism.The university is now considering several alternative levels of crime control.This table shows the expected annual costs and benefits of these alternatives.If Way-Below Normal undertakes Level Three:

The proposition that under some circumstances externalities can get resolved through private negotiation is known as:

It has been proposed that a government agency be charged with the responsibility for determining the amount of pollution which the atmosphere or a body of water can safely recycle, and sell these limited rights to polluters.What would be the advantage of such a market for pollution rights?

In a purely competitive industry at equilibrium price and quantity

Which is a characteristic of a public good?

The MC curves in the diagram slope upward because of the law of:

The socially optimal amount of pollution moderation occurs where society's marginal:

Supply-side market failure

Answer the next question on the basis of the following information for public good.P_a and P_b represent the prices that citizens (a) and (b), the only two people in this nation, are willing to pay for additional units of a quantity (Q_c) of the public good.Q_s represents the quantity of the public good supplied by government at each of the collective prices.The collective willingness of this nation to pay for the fourth unit of the public good is:

If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Society's marginal cost of pollution moderation curve slopes upward because of the law of diminishing marginal utility.