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Questions 16&17


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Question 16.
Imagine you are a student living in the dorms. You naturally wake up around noon but this semester you have
an 8 a.m. class. This is a problem, because you constantly sleep through your alarms. Each morning your
neighbor wakes up at 7 a.m., turns on loud music, and starts doing jumping jacks while loudly counting &quot;1, 2,
3...&quot; This is annoying, but it gets you out of bed in time to get ready for class. Because of this you get all
&quot;A's&quot; in the course. Does your neighbor's activities provide you with a private cost, private benefit, external
cost, external benefit?
a) Private cost
b) Private benefit
c) External cost
d) External benefit
e) None of the above
Question 17.
Drinking straws have been in the news lately as a way to highlight the dangers of excess plastic use. The
plastic in a drinking straw is used for a few minutes, but lasts basically forever-often ending up a landfill or
breaking down and adding plastic particles to the water supply. Let's assume the private benefit of one more
drinking straw is $1 and the social cost of one more drinking straw is $45. How can we use taxes or subsidies
to correct this externality?
a) Start a $1 tax on drinking straws
b) Start a $44 tax on drinking straws
c) Start a $45 tax on drinking straws
d) Start a $46 tax on drinking straws
e) Start a $1 subsidy on drinking straws
f) Start a $44 subsidy on drinking straws
g) Start a $45 subsidy on drinking straws
h) Start a $46 subsidy on drinking straws

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