A disc markets market failure and externalities

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a - DISC: Markets, market failure, and externalitiesKEYWORDS:Bloom's: ComprehensionExhibit 31-134. Refer to Exhibit 31-1. This graph represents a negative externality situation. Given this,which of the two curves, X or Y, represents marginal social costs and why?a.Curve X, because if there is a negative externality, external costs are associatedwith it: social costs = external costs + private costs, therefore the marginal socialcost curve must lie above the marginal private cost curve.b.Curve Y, because if there is a negative externality, negative external costs areassociated with it: social costs = negative external costs + private costs, thereforethe marginal social cost curve must lie below the marginal private cost curve.c.Curve X, because if there is a negative externality, external benefits are associatedwith it: social costs = external benefits + private costs, therefore the marginal socialcost curve must lie above the marginal private cost curve.d.Curve Y, because if there is a negative externality, negative external benefits are
associated with it: social costs = negative external benefits + private costs, thereforethe marginal social cost curve must lie below the marginal private cost curve.ANSWER:a
POINTS:1DIFFICULTY:ModerateNATIONAL STANDARDS:United States - BUSPROG: AnalyticLOCAL STANDARDS:United States - OH - Default City - DISC: Markets, market failure,a - DISC: Markets, market failure, and externalitiesKEYWORDS:Bloom's: Application35. Refer to Exhibit 31-1. If the exhibit represents a negative externality situation, then what isQ1?

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Term
Fall
Professor
FOUDY
Tags
Economics, Market failure, Externality

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