Question

37. Which of the following could explain the shift in the budget line illustrated below?

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Select one:

1. An increase in the income tax

2. good X goes on sale

3. A shortage of good Y

4. An increase in wages

38. In a market that creates a negative externality, the true supply curve is to the

1. Right of the market supply curve and there is an under-allocation of output.

2. Left of the market supply curve and there is an over-allocation of output

3. Left of the market supply curve and there is an under-allocation of output

4. Right of the market supply curve and there is an over-allocation of output

39. Amy and Nicole live next to each other in an apartment building. Amy values playing loud music at $200. The loud music annoys Nicole who values her peace and quiet at $300. Which of the following statements is true?

1. It is efficient for Amy to stop playing loud music regardless of who has the property rights over noise level.

2. It is efficient for Amy to play loud music only if Amy has the property right to peace and quiet.

3. It is efficient for Amy to stop playing loud music only if Nicole has the property right to peace and quiet.

4. It is efficient for Amy to play loud music only if Amy has the property right to the noise level

Answer 1

Note: These are three different questions and i can solve only one of them. But i solve two question. First question image is not shown.

(38.) In a market that creates a negative externality, the true supply curve is to the:

• Right of the market supply curve and there is an over-allocation of output

Explanation

In the case of negative externality, there is always over-allocation of output and the true supply curve lies to the right of the market supply curve.

(39.) Amy and Nicole live next to each other in an apartment building. Amy values playing loud music at $200. The loud music annoys Nicole who values her peace and quiet at $300. The following statements is true:

• It is efficient for Amy to play loud music only if Amy has the property right to the noise level

Explanation

It does not matter who has the property right. The point is that, once the property right is given to amy. The efficient outcome requires that, Amy to play loud music only if Amy has the property right to the noise level.