Question

19. The marginal external cost of dumping wastewater into a watershed is $100 per unit of effluent. Efficiency can be achieved by levying an effluent fee at a) a rate high enough to stop firms from dumping altogether. b) the firms' current marginal willingness to pay to dump. c) $100. d) None of the above. 20. An economy is efficient if a) resources are employed where they have highest economic value. b) the marginal willingness to pay (MWTP) for a good exceeds marginal cost. c) the sum of consumers' and producers' surpluses is minimized. d) the government leaves the allocation of resources solely to market forces. 21. Which of the following properties defines a "public good"? a) It is provided by the government. b) The marginal cost of producing additional quantity is zero. c) It is costless to include and costly to exclude an additional consumer. d) All of the above.

Answer 1

19. C

Fee should be equal to marginal external cost.

20. a

An economy is efficient if resources are allocated where they have highest economic value.

21. d

All of the above