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? 3. Based on the same market for college education above, what is the deadweight loss associated with the market equilibrium?
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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? 5. The Coase Theorem states that a. when transactions costs are low, assigning property rights can eliminate problems with externalities. b. when transactions costs are high, it is easier to eliminate problems with externalities. c. ocean waters that are overfished will only be protected if the government regulates them. d. monopolies can produce the efficient level of output if monopoly owners engage in rent-seeking behavior.
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  • Spring '08
  • Blanchard
  • Externality, Marginal private benefit, Marginal social benefit, Amy Brian Carl David Emily Fiona Gerry Hermione Izzy John Income

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