Question

1. Costs of Reducing Water Pollution

Water pollution (PPM)	45	35	25	10	0
Social benefit (dollars)	120	190	240	270	280
Social cost (dollars)	20	25	35	65	100
Marginal social benefit (dollars per PPM)		_____	_____	_____	_____
Marginal social cost (dollars per PPM)		_____	_____	_____	_____

Using the Costs of Reducing Water Pollution table, which of the following explains why the lake should not be made entirely free of pollution?

Multiple Choice

• The marginal social costs of reaching 0 PPM are greater than the marginal social benefits from doing so.

• There would be no benefit in making the lake completely clean.

• The total social cost would exceed the total social benefit of completely cleaning the lake.

• Society cannot clean up the lake.

2.  If relative prices change, then the inflation rate must change. TRUE/False?

3. In economics, a public good

Multiple Choice

• is provided in an optimal amount by the market.

• always causes government failure.

• is any good produced by the government.

• allows free riders to benefit from the good.

7.  The business cycle is the alternating periods of economic growth and contraction. TRUE/FALSE?

Answer 1

1) Costs of Reducing Water Pollution

Water pollution (PPM)	45	35	25	10	0
Social benefit (dollars)	120	190	240	270	280
Social cost (dollars)	20	25	35	65	100
Marginal social benefit (dollars per PPM)	-	____70_	__50___	__30___	___10__
Marginal social cost (dollars per PPM)	-	_____5	____10_	____30_	___35__

Using the Costs of Reducing Water Pollution table, which of the following explains why the lake should not be made entirely free of pollution?

Answer is --

• The marginal social costs of reaching 0 PPM are greater than the marginal social benefits from doing so.

2) If relative prices change, then the inflation rate must change.

The statement is True.

The inflation rate changes due to change in relative prices of commodities.

3) A public good

Allows free rider to benefit from the good.

7) The business cycle is the alternating periods of economic growth and contraction.

The statement is True. Business cycles are upward downward movements in the economy.

If you have any doubts please comment...