260 Figure#3: sPrte The Impact of Externality from a 73 63 of of Externality fro

Question

260 Figure#3: sPrte The Impact of Externality from a 73 63 of of Externality from a Producer 3.3 1.3 100 200 300 4b0 500 600 700 800 900u 14. Refer to Figure #3. What is the socially-optimal quantity of output in this market? a. 200 units. b. Between 200 and 450 units. c.500 units. d. Between 500 and 650 units. 15. Refer to Figure #3. Ifthe government wanted internalize the externality to achieve the socially-optimal level of output, how large externality to would the per unit tax need to be? a. d. The size of the subsidy cannot be determined from the figure b. Less than $2 16. Refer to Figure #3. If is the tax revenue? the government wanted internalize the externality to achieve the socially-optimal level of output, how much wanted a. $500. b. S1000. CSS1500. d. The size of the tax revenue canot be determined from the figure. 17. A private good is both rivalry in consumption and excludable, which of the following would NOT be considered a c. french fries. d. a hiking trail. a. pizza b. l-phone 8. 18. Goods that are neither excludable nor rival in consumption would be considered public goods. Which of the following would be d. a boat. considered a public good? a. national park. c. a bicycle b. TV or internet cable hiking trail. 19. Goods that are both non-excludable and rival in consumption would be considered common resources. Which of the following goods is a common resource? a. national defense c. a private resource. b. cable TV service. d. long leg crabs in the ocean. 20. 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. 21. A free rider is a person who receives the benefit of a good but avoids paying for it. A free-rider problem exists for any good that is not excludable. When goods are not excludable a. the goods will not be produced since no one values them. b. the free-rider problem prevents the private market from supplying them. c. the free-rider problem encourages the private market to supply them abundantly d. the private market will produce the goods but will charge less for them than if they are produced as public goods.

Explanation / Answer

Question 14-16 are answered below

14.

Correct option: 500 units

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

15.

Correct option: $2

Reason: Externality cost = Tax amount = Social cost - Private cost = $5-$3 = $2

16.

Correct option: $1000

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

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