Question

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If education produces positive externalities and the government does not intervene in the market, we would expect O the equilibrium price to be higher than the optimal price. b. the equilibrium quantity to be lower than the optimal level. c.the equilibrium quantity to be higher than the optimal level. d. both a and b are correct Tradable pollution permits a. have prices that are set by the government. b. will be more valuable to firms that can reduce pollution only at high costs. c. are likely to create a higher level of total pollution O d, are less desirable than command-and-control policies to reduce pollution. Figure 10-11 T Price 63 Supply private cost) 36 Social value (private value and extemal benefit) 24 15 Demand (private value) 420 Quantity 240 Refer to Figure 10-l1. Which of the following statements is correct? a.The private value of the 420th unit of output is $15. b. The social value of the 420th unit of output is $42. c. The external benefit of the 420t unit of output is $27 d. All of the above are correct. Table 13-4 Charles's Math Tutoring umber of Output (number Workers f students tutored per ek) Refer to Table 13 4. Suppose that Charles s math tutoring company has a xed cost of 50 per month for his cell phone Each work costs Charles S60 per day. As output ents, Chan sto a o to st cost c crea es e Oa. increases but gets flatter. b. increases and gets steeper. O c. decreases and gets flatter. d. decreases but gets steeper.

Answer 1

1. b. the equilibrium quantity to be lower than the optimal level.
(There will be underconsumption so equilibrium quantity will be lower.)

2. b. will be more valuable to firms that can only reduce pollution at high costs
(Tradeable pollution permits will hold more value for firms that can reduce pollution at high costs.)

3. d. all of the above
(All the statements given for 420th unit are true.)

4. b. increases and gets steeper.
(As from 45 to 70 units, increase in output would be lower than increase in cost, so TC increases and gets steeper.)