Review for Test 2

Review for Test 2 - Economics 2010 Section II Questions for...

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Economics 2010 Section II Questions for Review 1. Define efficiency. 2. Define and explain the concept of a positive consumption externality. Give an example (not involving education) – be sure to note the difference between the good or service, and the externality. 3. When a negative production externality exists, the market outcome will yield too much production and the price will be too low. Both a price floor and a tax could raise the price to the efficient level. Explain (and show graphically) why you would choose the tax over the price floor. 4. Define a public good. Give an example of a public and a private good, and use your definition to make clear the difference between the two. 5. In economics, there is a concept called “Pareto Optimality”. If a situation is Pareto Optimal, then roughly, no one person can be made better off without making someone else worse off. What is the relationship between the concept of efficiency in our partial equilibrium, supply and demand model, and the notion of Pareto Optimality? 6.
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This test prep was uploaded on 11/13/2007 for the course ECON 2010 taught by Professor Mertens,wi during the Fall '07 term at Colorado.

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Review for Test 2 - Economics 2010 Section II Questions for...

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