Practice6

Practice6 - Experiment 6 1. If the production and sale of a...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Experiment 6 1. If the production and sale of a good causes a positive externality, the total profits of buyers and sellers are maximized by a competitive equilibrium. Answer: False 2. If the production and sale of a good causes a negative externality, a tax on the sale of that good can increase total profits. Answer: True 3. Residents of the town of Los Locos (population 100) like to drive noisy offroad vehicles, but they hate the disturbance and dust caused by each others' vehicles. Each vehicle that is purchased by a resident causes $20 worth of damage to each of the 100 residents. There are 20 residents who are willing to pay up to $4,000 for an offroad vehicle. There are 30 residents who are willing to pay up to $3,000 for an offroad vehicle and there are 50 residents who are willing to pay up to $2,500 for an offroad vehicle. The price of offroad vehicles is $1,200. In the absence of any governmental interference, how many residents of Los Locos would buy offroad vehicles? (a) 0
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Practice6 - Experiment 6 1. If the production and sale of a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online