5) When dealing with externalities, the free-market equilibrium can be moved clo

Question

5)  When dealing with externalities, the free-market equilibrium can be moved closer to the optimum by:

a)     Taxing positive externalities and subsidizing negative externalities

b)    Taxing negative externalities and subsidizing positive externalities

c)     Taxing both positive and negative externalities

d)    Subsidizing both positive and negative externalities

e)     None of the above

6)  Assume there are two people in a society. Person A is willing to pay $50 to have one unit of a public good produced.  Person B is willing to pay $60 to have one unit of a public good produced.  A point on the market demand curve for this public good would be:  at a price of ___________ quantity demanded would be _______________.  

a)  $50; 3

b)  $100; 3

c)  $100; 1

d)  $110; 1

When dealing with externalities, the free-market equilibrium can be moved closer to the optimum by: Taxing positive externalities and subsidizing negative externalities Taxing negative externalities and subsidizing positive externalities Taxing both positive and negative externalities Subsidizing both positive and negative externalities None of the above Assume there are two people in a society. Person A is willing to pay $50 to have one unit of a public good produced. Person B is willing to pay $60 to have one unit of a public good produced. A point on the market demand curve for this public good would be: at a price of _ quantity demanded would be ___. $50; 3 $100; 3 $100; 1 $110; 1

Explanation / Answer

6. answer a. $50; 3

by charging a price of $50, firms can earn a maximum of $150   

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