Econ 2100 UGA Test 1 and 2 Questions With
Correct Answers
a |producer |releases |chemical |waste |into |a |stream. |The |negative |effects |of |chemical |waste |
release |are |not |captured |by |the |private |market |leading |to |a |market |failure.
Suppose |Q |is |the |amount |of |chemical |waste |in |thousands |of |barrels, |and |P |is |the |price |per |
barrel. |The |marginal |social |benefit |(MSB), |marginal |private |cost |(MPC) |and |marginal |external |
cost |(MEC), |respectively, |are
MSB= |50 |- |0.3Q
MPC= |10 |+ |0.5Q
MEC= |0.2Q
The |competitive |equilibrium |quantity |and |price, |respectively, |are |- |CORRECT |ANSWER✔✔-50, |
35
(T/F) |In |theory, |the |market |demand |curve |for |a |pure |public |good |can |be |obtained |by |a |
horizontal |summation |of |individual |demand |curves |for |that |good. |- |CORRECT |ANSWER✔✔-
False |
why: |it's |a |vertical |summation
(T/F) |A |competitive |equilibrium |in |the |presence |of |a |negative |production |externality |for |a |
good |will |lead |to |overproduction |of |that |good |because |the |market |ignores |the |cost |associated |
with |the |externality. |- |CORRECT |ANSWER✔✔-True
,Assume |that |production |level |(Q) |is |50 |units. |If |the |marginal |private |cost |(MPC) |and |marginal |
social |cost |(MSC) |of |production, |respectively, |are |
MPC= |10 |+ |0.2Q
MSC= |10+ |0.5Q
Then, |the |marginal |external |cost |(MEC) |at |Q=50 |is |- |CORRECT |ANSWER✔✔-15
When |a |negative |production |externality |is |generated, |then |the |marginal |social |cost |is |
a) |the |same |as |marginal |private |cost
b) |is |equal |to |marginal |private |cost |plus |marginal |external |cost
c) |is |equal |to |marginal |private |cost |minus |marginal |external |cost |- |CORRECT |ANSWER✔✔-b) |is |
equal |to |marginal |private |cost |plus |marginal |external |cost
a |producer |releases |chemical |waste |into |a |stream. |The |negative |effects |of |chemical |waste |
release |are |not |captured |by |the |private |market |leading |to |a |market |failure.
Suppose |Q |is |the |amount |of |chemical |waste |in |thousands |of |barrels, |and |P |is |the |price |per |
barrel. |The |marginal |social |benefit |(MSB), |marginal |private |cost |(MPC) |and |marginal |external |
cost |(MEC), |respectively, |are
MSB= |50 |- |0.3Q
MPC= |20 |+ |0.5Q
MEC= |0.2Q
the |allocatively |efficient |quantity |and |price, |respectively, |are |- |CORRECT |ANSWER✔✔-30, |41
(T/F) |Suppose |the |inverse |demand |curves |(for |a |public |good) |for |two |consumers |are |given |as |
follows:
Consumer#1: |p1= |10 |- |Qd
, Consumer#2: |p2= |15 |- |0.5Qd
Where |p1, |p2 |are |the |demand |prices |($/unit) |or |willingness |to |pay |for |the |two |consumers, |
respectively. |
Then |is |the |market |demand |curve |for |this |public |good |is |given |as |P= |25 |- |Qd |? |- |CORRECT |
ANSWER✔✔-False
why: |it |should |be |25 |- |1.5Qd |(add |the |equations)
(T/F) |A |pure |public |good |is |one |that |is |nonrival |in |consumption |and |yields |benefits |that |are |
excludable |- |CORRECT |ANSWER✔✔-False
why: |non-excludable
Following |are |the |demand |estimates |for |an |air |filtration |system |in |two |districts |of |a |town:
District#1: |Q=40 |- |10p1
District#2: |Q=5 |- |5p2
Where |Q |is |the |percent |of |a |pollutant |to |be |filtered |by |the |system, |and |P |is |the |price |in |
millions |of |dollars. |Determine |the |town's |market |demand |for |this |public |good. |- |CORRECT |
ANSWER✔✔-P |= |-0.3Q |+ |5
(T/F) |a |pure |private |good |is |one |that |is |nonrival |in |consumption |and |yields |benefits |that |are |
excludable. |- |CORRECT |ANSWER✔✔-False
why: |private |good |is |rival |and |excludable
Correct Answers
a |producer |releases |chemical |waste |into |a |stream. |The |negative |effects |of |chemical |waste |
release |are |not |captured |by |the |private |market |leading |to |a |market |failure.
Suppose |Q |is |the |amount |of |chemical |waste |in |thousands |of |barrels, |and |P |is |the |price |per |
barrel. |The |marginal |social |benefit |(MSB), |marginal |private |cost |(MPC) |and |marginal |external |
cost |(MEC), |respectively, |are
MSB= |50 |- |0.3Q
MPC= |10 |+ |0.5Q
MEC= |0.2Q
The |competitive |equilibrium |quantity |and |price, |respectively, |are |- |CORRECT |ANSWER✔✔-50, |
35
(T/F) |In |theory, |the |market |demand |curve |for |a |pure |public |good |can |be |obtained |by |a |
horizontal |summation |of |individual |demand |curves |for |that |good. |- |CORRECT |ANSWER✔✔-
False |
why: |it's |a |vertical |summation
(T/F) |A |competitive |equilibrium |in |the |presence |of |a |negative |production |externality |for |a |
good |will |lead |to |overproduction |of |that |good |because |the |market |ignores |the |cost |associated |
with |the |externality. |- |CORRECT |ANSWER✔✔-True
,Assume |that |production |level |(Q) |is |50 |units. |If |the |marginal |private |cost |(MPC) |and |marginal |
social |cost |(MSC) |of |production, |respectively, |are |
MPC= |10 |+ |0.2Q
MSC= |10+ |0.5Q
Then, |the |marginal |external |cost |(MEC) |at |Q=50 |is |- |CORRECT |ANSWER✔✔-15
When |a |negative |production |externality |is |generated, |then |the |marginal |social |cost |is |
a) |the |same |as |marginal |private |cost
b) |is |equal |to |marginal |private |cost |plus |marginal |external |cost
c) |is |equal |to |marginal |private |cost |minus |marginal |external |cost |- |CORRECT |ANSWER✔✔-b) |is |
equal |to |marginal |private |cost |plus |marginal |external |cost
a |producer |releases |chemical |waste |into |a |stream. |The |negative |effects |of |chemical |waste |
release |are |not |captured |by |the |private |market |leading |to |a |market |failure.
Suppose |Q |is |the |amount |of |chemical |waste |in |thousands |of |barrels, |and |P |is |the |price |per |
barrel. |The |marginal |social |benefit |(MSB), |marginal |private |cost |(MPC) |and |marginal |external |
cost |(MEC), |respectively, |are
MSB= |50 |- |0.3Q
MPC= |20 |+ |0.5Q
MEC= |0.2Q
the |allocatively |efficient |quantity |and |price, |respectively, |are |- |CORRECT |ANSWER✔✔-30, |41
(T/F) |Suppose |the |inverse |demand |curves |(for |a |public |good) |for |two |consumers |are |given |as |
follows:
Consumer#1: |p1= |10 |- |Qd
, Consumer#2: |p2= |15 |- |0.5Qd
Where |p1, |p2 |are |the |demand |prices |($/unit) |or |willingness |to |pay |for |the |two |consumers, |
respectively. |
Then |is |the |market |demand |curve |for |this |public |good |is |given |as |P= |25 |- |Qd |? |- |CORRECT |
ANSWER✔✔-False
why: |it |should |be |25 |- |1.5Qd |(add |the |equations)
(T/F) |A |pure |public |good |is |one |that |is |nonrival |in |consumption |and |yields |benefits |that |are |
excludable |- |CORRECT |ANSWER✔✔-False
why: |non-excludable
Following |are |the |demand |estimates |for |an |air |filtration |system |in |two |districts |of |a |town:
District#1: |Q=40 |- |10p1
District#2: |Q=5 |- |5p2
Where |Q |is |the |percent |of |a |pollutant |to |be |filtered |by |the |system, |and |P |is |the |price |in |
millions |of |dollars. |Determine |the |town's |market |demand |for |this |public |good. |- |CORRECT |
ANSWER✔✔-P |= |-0.3Q |+ |5
(T/F) |a |pure |private |good |is |one |that |is |nonrival |in |consumption |and |yields |benefits |that |are |
excludable. |- |CORRECT |ANSWER✔✔-False
why: |private |good |is |rival |and |excludable
