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ch9answers - CHAPTER 9 GOVERNMENT INTERVENTION PROBLEMS 1....

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GOVERNMENT INTERVENTION PROBLEMS 1. a. Draw a production possibilities curve with cars on the horizontal axis and  “other  goods” on the vertical axis. b. Illustrate on your curve the market failure that occurs in Figure 9.3 a. b. Point A represents the market failure of Figure 9.3. The existence of externalities in the car market suggests that too many cars are being produced. A more socially optimal point would be a lesser output level of cars as represented by point B. CHAPTER 9 Production Possibilities Curve 0 200 400 600 800 1000 1200 0 100 200 300 400 500 Quantity of Cars Production (in thousands) A B
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2. Draw market-demand and social-demand curves for flu shots. Since flu shots have an external benefit, the social demand for flu shots is  larger than the market demand for flu shots. 3. Suppose the following data represent the market demand for college education: a. If tuition is set at $5,000, how many students will enroll? Now suppose that society gets an external benefit of $1,000 for every enrolled  student (for, say, more informed voting). b. Draw the social and market demand curves for this situation. c.
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This note was uploaded on 04/18/2008 for the course ECON 201 taught by Professor Bertaux during the Spring '08 term at Xavier.

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ch9answers - CHAPTER 9 GOVERNMENT INTERVENTION PROBLEMS 1....

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