Question

1) LTIPLE CHOICE. Choose the one alternative that best completes the statement or answer the question. 1) In recent years, as provincial goverments attempt to balance their budgets, they have increased tuition fees considerably. This increase will likely result in A) more students B) fewer students. C) under-provision of education compared to the efficient level D) over-provision of education compared to the efficient level. E) B and C 2) 2) When Good A is produced, pollution is also produced. When the marginal social cost of production of Good A equals marginal social benefit from Good A, then I there is no pollution II. resources are used efficiently A) II only B) neither I nor II both I and II D) I only E) sometimes I and sometimes II, but never both simultaneously 3) Betty and Anna work at the same office in Calgary. They both must attend a meeting in Edmonton, i 3) they have decided to drive to the meeting together. Betty is a cigarette smoker and her marginal benefit from smoking one package of cigarettes a day is Cigarettes are $6 a pack. Anna dislikes cigarette smoke and her marginal benefit from a smoke-free environment is $50 a day If Betty drives her car with Anna as a passenger, If Anna drives her car with Betty as a pas A) Betty will smoke because she owns the property rights in the car, Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke B) Betty will smoke because she owns the property rights in the car; Betty will offer Anna $51 and Betty will smoke C) Anna will offer Betty an amount between $34 and $50 and Betty will not smoke; Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke D) Betty will smoke because she is the car owner; Betty will offer Anna an amount between $34 and $50 and Betty will smoke E) Anna will offer Betty an amount between $34 and $50 and Betty will not smoke; Betty will offer Anna $51 and Betty will smoke onsider some type of industrial pollution that generates air pollution. This industry, if left sregulated, will produce A) too little output because they will ignore the marginal external benefits. B) the efficient level of output. C) too much output because they will ignore the marginal external benefits. ) too much output because they will ignore the marginal external costs. 9) too little output because they will ignore the marginal external costs.

Answer 1

1.

Answer: E

Both B and C are right here.

The increasing fees make the education costly; it attracts fewer students to study.

This is not the efficient level of education, since at the efficient level fees must equal to marginal cost.

2.

Answer: A

Since there is (MSC = MSB), there is allocative efficiency.

Therefore, this is the efficient use of resources.

3.

Answer: E

Any sort of negotiation could be executed – A can offer money to B exceeding the marginal benefit of B but equal or below the marginal benefit of A so that B should not smoke, or B can offer money to A exceeding the marginal benefit of A so that B is allowed to smoke.

4.

Answer: D

If there is no regulation of pollution, the industry would be having no concern about the marginal external cost, such as the burden of tax. There would be much more production of output.