Question

1.What are the two main methods used to integrate external benefits into the provision of goods and services?

Select one: A. By providing normal goods or taxing producers. B. By taxing producers and consumers. C. By providing quasi-public goods or subsidizing producers. D. By providing quasi-public goods or taxing producers.

2 .Why does the market fail to produce public goods?

Select one:

A. Because such products usually entail large external costs.

B. Because it is impossible for the producer to exclude non-buyers from enjoying the benefit.

C. Because their production normally leads to increased income inequality.

D. Because normally there is no demand for such goods.

3.If the price of a product is less than its marginal social costs, then:

Select one:

A. External costs must be zero.

B. Society would prefer less of this product being produced.

C. Short-run average costs must be at minimum.

D. Society would prefer more of this product being produced.

4.The sum of the economic surpluses accruing to buyers and sellers is

Select one:

A. conspicuous consumption.

B. deadweight loss.

C. consumer surplus.

D. total economic surplus.

E. producer surplus.

Answer 1

Q(1)

One of the most important roles of government is to implement economic policies that can promote positive externalities in the economy. and mainly there are two general approaches that can be used to promoting positive externalities, and it can be done either by increasing the supply or by increasing the demand for, the goods, and services, and all those resources that generate external benefits, and for this Government provides subsidies to producers of goods and services that generate external benefits and it will reduce the costs of production, and encourage them for more supply.

Answer - By providing quasi-public goods or subsidizing producers.

Q(2)

mainly market fail to produce public goods because they cannot differentiate between free rider and those who have paid for it thus there will be a loss to them.

Answer - Because it is impossible for the producer to exclude non-buyers from enjoying the benefit.

Q(3)

So If the price of a product is less than its marginal social costs, then in that case definitely people would demand more because of its low price and it would be preferred to produce more

Answer - Society would prefer more of this product being produced

Q(4)

As we know The sum of the economic surpluses accruing to buyers and sellers is always equal to the total economic surplus. The term economic surplus mainly refers to the sum of producer surplus and consumer surplus in a transaction, and  It is the gain that producers and consumers make when a transaction occurs between them.

Answer - Total economic surplus.