Class23_04

Class23_04 - Practice Questions 1 The following is the...

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10 20 30 40 50 10 2 4 6 8 Tuition and Cost (thousand $) Q (thousand students) MB MC = S MSB 12 Practice Questions 1. The following is the market for college education. The fact that MSB > MB indicates that college education generates a _____________________. a. positive consumption externality b. negative production externality c. common resource d. nonrival but excludable service 2. Based on the market for college education above, at what number of students is allocative efficiency reached? a. 8,000 b. 10,000 c. 20,000 d. 30,000 3. Based on the same market for college education above, what is the deadweight loss associated with the market equilibrium? a. $120,000,000 b. $60,000,000 c. $40,000,000 d. $180,000,000
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4. Based on the same graph above, what subsidy would have to be offered to achieve the efficient level of education? a. $4,000 b. $2,000 c. $0 d. $10,000 5. The Coase Theorem states that a. when transactions costs are low, assigning property rights can eliminate problems with externalities. b.
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This note was uploaded on 04/29/2008 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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Class23_04 - Practice Questions 1 The following is the...

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