ECO 2023 Homework 5 Questions and Answers Verified

ECO 2023 Homework 5 Questions and Answers Verified. In the above case, the marginal social benefit (MSB) associated with the consumption of alcohol is lower than the marginal private benefit (MPB) due to the negative consumption externalities, which is reflected by the positioning of (D2) below (D1). In the above diagram, the market equilibrium is achieved at the point (E) where the marginal private cost (NIPC) is equal to the marginal private benefit (MPB), with price PM and quantity AM. In this case, the negative externalities, associated with alcohol consumption, have not been taken into account. If the externalities associated with alcohol consumption are taken into account then the socially optimal equilibrium point will be (M) in the diagram, with price PE and quantity AB. Note mat socially optimal quantity AB is less than the equilibrium quantity achieved by the market mechanism AM. There is a dead weight loss to die society represented by the area (D) due to the over consumption of alcohol, when externalities associated with the consumption of alcohol are not included in the market transaction. 2: 1.12 (5 Edition), 1.11 (4,6 Edition) 1.11 Tom and Jacob are college students. Each of them will probably get married later and have two or three children. Each knows that if he studies more in college, he’ll get a better job and earn more money than if he doesn’t study. Earning more will enable them to spend more on their future families—things like orthodontia, nice clothes, admission to expensive colleges, and travel. Tom thinks about the potential benefits to his potential children when he decides how much studying to do. Jacob doesn’t.