Question 7: Lightsabers are the primary weapon used by the Jedi. Suppose that at

Question

Question 7: Lightsabers are the primary weapon used by the Jedi. Suppose that at the current production levels, the marginal social benefit of lightsabers is $5000, the marginal private benefit of lightsabers is $4000, and the marginal private and marginal social cost of lightsabers is $4000. From a social efficiency standpoint, Jedi officials should C 1 take action to decrease lightsaber production C 2) take no action regarding lightsaber production 3) take action to increase lightsaber production C 4) none of the above Question 13: Decisions by individuals to build human capital through educational investments depend upon C 1) the marginal benefits of education to that individual C 2) the marginal costs of education to that individual 3) 4) All of the above are correct an individual's discount rate. C Question 14: Suppose that you got a $1000 graduation present this spring. If the interest rate is 3% per year and you invest the money for two years, how much will you have in two years (rounded to the nearest dollar)? C 1) $1,000 * 2 * 1.03 $2,060 2) $1000 * 1.03 = $1,030 C 3) (S1000/1.03) * 1.03) $1,000 4) $1000 * 1.03 * 1.03 = $ 1,061

Explanation / Answer

(Question 7) Option (3)

Since marginal social benefit is higher than marginal private benefit, there is a positive externality in consumption and officials should take action to increase production.

(Question 13) Option (4)

All of the factors determine decision to invest in education. An individual will invest in education if

Discounted present value of marginal benefits = Discounted present value of marginal costs.

(Question 14) Option (4)

Future worth = $1,000 x 1.03 x 1.03 = $1,060.9

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