Question :
41) If a firm produces a good and its consumption : 1384309
41) If a firm produces a good and its consumption generates external benefits, then at the competitive market equilibrium
A) the government could subsidize the production of this good to improve efficiency.
B) the marginal private benefit is greater than the marginal cost of producing the last unit.
C) the output would be more than the socially optimal amount.
D) the firm will not produce an additional amount if it can internalize the external benefits.
E) the marginal social benefit is less than the marginal cost of producing the last unit.
42) Refer to Figure 16-2. Suppose that the marginal benefit curve (MB) includes all social benefits and that there are no externalities in production. In this case, ________ for allocative efficiency.
A) P1 and Q1 are appropriate
B) the price P1 is appropriate but the quantity Q1 is too low
C) the price P1 is appropriate but the quantity Q1 is too high
D) the price P1 is too low but the quantity Q1 is appropriate
E) the price P1 is too high but the quantity Q1 is appropriate
43) Refer to Figure 16-2. Suppose that the marginal benefit curve (MB) includes all social benefits and that there is a negative externality in production. In this case, ________ for allocative efficiency.
A) P1 and Q1 are appropriate
B) the price P1 is appropriate but the quantity Q1 is too low
C) the price P1 is appropriate but the quantity Q1 is too high
D) the price P1 is too low and the quantity Q1 is too high
E) the price P1 is too high and the quantity Q1 is too low
44) Refer to Figure 16-2. Suppose that the marginal benefit curve (MB) includes all social benefits and that there is a positive externality in production. In this case, ________ for allocative efficiency.
A) P1 and Q1 are appropriate
B) the price P1 is appropriate but the quantity Q1 is too low
C) the price P1 is appropriate but the quantity Q1 is too high
D) the price P1 is too low and the quantity Q1 is too high
E) the price P1 is too high and the quantity Q1 is too low
45) Consider a product (say, tulip bulbs) that generates positive externalities when it is consumed (other people enjoy looking at them). In this case,
A) the government could tax the production of this good to improve efficiency.
B) at market equilibrium, the marginal social benefit is less than the marginal cost of producing the last unit.
C) at the market equilibrium, the output would be greater than the socially optimal amount.
D) firms will produce too little of this product unless they internalize the external benefits.
E) at the market equilibrium, the price is too high to be allocatively efficient.
46) If a homeowner uses wood to heat his house,
A) he may generate an external cost if the smoke bothers his neighbours.
B) the price of the wood represents an external cost to the homeowner.
C) the price of the wood represents an external cost to the homeowner, unless he harvests the wood himself.
D) he may generate an external benefit if the smoke bothers his neighbours.
E) he may generate an external benefit if the price of heating oil goes down in his region.
47) A flu vaccine has an associated ________ externality. In the absence of government intervention, the quantity of flu vaccines purchased will be ________ the socially optimal quantity.
A) positive; the same as
B) negative; the same as
C) negative; less than
D) positive; less than
E) positive; more than
48) Refer to Figure 16-3. Assume there are two types of firms in this region – beekeepers that produce honey and orchard keepers that produce peaches. The bees provide a benefit to the orchard keepers by pollinating their peach trees. In the absence of any government intervention, the equilibrium price and quantity in the honey market are
A) $5 and 60 kg.
B) $5 and 100 kg.
C) $7 and 80 kg.
D) $9 and 60 kg.
E) $11 and 80 kg.
49) Refer to Figure 16-3. Assume there are two types of firms in this region – beekeepers that produce honey and orchard keepers that produce peaches. The bees provide a benefit to the orchard keepers by pollinating their peach trees. We can say that there is a ________ externality in the production of honey. The curve ________ represents the ________ marginal benefit of honey.
A) positive; ; social
B) negative; ; private
C) negative; ; social
D) positive; ; social
E) positive; ; private
50) Refer to Figure 16-3. Assume there are two types of firms in this region – beekeepers that produce honey and orchard keepers that produce peaches. The bees provide a benefit to the orchard keepers by pollinating their peach trees. If the government subsidizes the beekeepers so as to fully internalize the externality, the equilibrium price of honey would be ________ and the allocatively efficient output would be ________.
A) 3; 80
B) 5; 100
C) 7; 100
D) 9; 60
E) 11; 80
