HW9 - ECO 108: Introduction to Economics Problem Set 9...

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ECO 108: Introduction to Economics Problem Set 9 (Chapter 12) Professor: Shanjun Li 1.An external cost of an activity is one that is A) borne by those not directly involved. D)present only if the activity yields pollution. B) borne only by those directly involved. E) transferred from consumers to producers. C) included in the private marginal cost curve. 2. An external benefit of an activity is one that is A) not included in the social marginal costs. D) never present in the real world. B) received by those directly involved. E) received by those not directly involved. C) included in the private marginal benefits. 3.The existence of a negative externality will result in A) economic efficiency if there is no government intervention in the market. B) a greater than optimal level of activity. C) prices that are artificially high. D) elimination of deadweight loss. E) a less than optimal level of activity. 4.Laws that regulate the behavior of firms and of individuals are often enacted in order to A) eliminate all negative externalities. B) convert private benefits into positive externalities. C) provide longer prison terms for those that generate negative externalities. D) correct resource misallocation due to externalities. E) redistribute income more equitably. 5.If the market equilibrium quantity is greater than the socially optimal quantity in a perfectively competitive market, one can infer that A) the private supply curve for the activity is to the left of the socially optimal supply curve. B) the private demand curve for the activity is below the socially optimal demand. C) the production of this good has a positive externality. D) the production of this good has a negative externality. E) the production of this good has no externality. 6.If the market equilibrium quantity is less than the socially optimal quantity in a perfectly competitive market, one can infer that A) the private supply curve for the activity is below the socially optimal supply
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curve. B) the private demand curve for the activity is above the socially optimal demand. C) the production of this good has a positive externality. D) the production of this good has a negative externality. E) firm are not maximizing profits. 7. In the case of either a positive or negative externality, it will always be true that, relative to the social optimum, A) the market price will be too low. B) the market price will be too high. C) the market price will send an inaccurate signal of true cost or benefit. D) the quantity provided by the market will be too large. E) the quantity provided by the market will be too small.
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This note was uploaded on 09/17/2011 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

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HW9 - ECO 108: Introduction to Economics Problem Set 9...

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