Question

57. The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit.




Refer to the figure above. A total of ________ units of this good will be traded in this market, at the price of ________.

Price Supply Demand 20 40 60 80 100 120 140 160 180 200 Quantity

a. 20; $2

b. 60; $8

c. 40; $4

d. 80; $6

58. The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit.




Refer to the figure above. The socially optimal price for this good should be ________.

a. $4

b. $6

c. $7

d. $8

59. The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit.




Refer to the figure above. The socially optimal quantity of this good should be ________ units.

a. 100

b. 70

c. 80

d. 60

60. The presence of external benefits associated with production implies that ________.

a. private output is less than the socially optimal output

b. private output corresponds to the socially optimal output

c. private output exceeds the socially optimal output

d. Any of these, depending on the relative magnitude of social and private benefits

Answer 1

Price Supply Demand 20 40 60 80 100 120 140 160 180 200 Quantity

57) q=80, p = 6

option(D)

58) p =7

option(C)

59) q= 60

option(D)

60) Private output is greater than social output

option(C)