Principles of Macroeconomics

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Econ 101: Principles of Microeconomics NAME: Korinna K. Hansen Disc. Section: Practice Quiz 12 In solving this problem make sure that you present clear, well labeled graphs that incorporate all the information you are given. You can use the back of this page as scrap. I will not look at the back when grading this quiz, so you should present your complete answer by the question. No long full sentences are required for this quiz. 1. (5 points) Consider the production of steel - which releases pollutants into the atmosphere. In the graph below present the marginal private cost (MPC), marginal social cost (MSC), marginal private benefits (MPB), and marginal social benefits (MSB) in steel production. Indicate the market equilibrium at price P1 and quantity Q1. Show the efficient level of output at quantity Q2.
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Unformatted text preview: Exactly how high of a tax (or subsidy) will bring about the socially efficient result? In the above graph, show the new prices P2 that consumers would pay, and P3 that steel producers would receive. 2. (5 points) Consider the existence of higher education and its multiple benefits to society at large. In the graph below present the marginal private cost (MPC), marginal social cost (MSC), marginal private benefits (MPB), and marginal social benefits (MSB) for higher education. Indicate the market equilibrium at price P1 and quantity Q1. Show the efficient level of output at quantity Q2. Exactly how high of a tax (or subsidy) will bring about the socially efficient result? In the above graph, show the new prices P3 that students pay, and P2 that Colleges and Universities receive....
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