Econ 528 Final Exam UPDATED QUESTIONS AND CORRECT ANSWERS

Econ 528 Final Exam UPDATED
QUESTIONS AND CORRECT ANSWERS
4 - CORRECT ANSWER (Figure 17.2) Suppose the external marginal cost is constant at $5
per unit. Price (demand) equals social marginal cost at output level:



Select one:

a. 6

b. 4

c. 3

d. 7



I and III - CORRECT ANSWER (Figure 17.3) Which of the following statements is (are)
TRUE?



I.



The socially optimal quantity is 3.



II.



The deadweight loss associated with the perfectly competitive output level is $4.50.



III.



The external marginal cost is $6.




Select one:

a. I, II, and III

b. II and III

, c. I and II

d. I



3 - CORRECT ANSWER Table 17.1) According to the table, what is the socially optimal
output level?

Select one:

a. 4

b. 7

c. 3

d. 0



I and II - CORRECT ANSWER Which of the following statements is (are) TRUE?



I. In the face of a positive externality, a perfectly competitive market produces less than the socially
optimal quantity of output.



II. If vaccinations generate an external marginal benefit, their marginal social benefit will always
exceed their private marginal benefit.



III. In unregulated markets, the presence of negative externalities—but not positive externalities—
causes deadweight losses.




Select one:

a. I and II

b. I, II, and III

c. I and III

d. III



At 2,000 units of pollution, the marginal benefit exceeds the marginal cost, so there should be more
pollution - CORRECT ANSWER (Figure 17.7) Which of the following statements is TRUE?