Question

1. Which of the following is not an example of an externality?

1. A drought increases the price of meat
2. Acid rain affects agricultural production
3. A factory discharges waste into a local river
4. Flowers are planted on street verges in a city

 

2. The most efficient goal for society with regard to the environment is to clean up pollution until:

1. All pollution is eliminated
2. The total benefit from pollution cleanup is maximised
3. We have eliminated all pollution that does not cost us any jobs
4. The marginal benefit to society from the last dollar spent on pollution cleanup is exactly one dollar

 

3. Which of the following statements is true:

1. Social cost = private cost – the external cost of pollution
2. Social cost = private cost + the external cost of pollution
3. Social cost = cost of pollution
4. Social cost + cost of pollution = private cost.

 

4. If the last unit of output produced at a factory has a value to society of $10 and a social cost of $15, but the private cost to the producer is $10 and the current price is $10, then the:

1. Market is in equilibrium, but a lower output would make society better off
2. Market is in equilibrium, but a higher output would make society better off
3. Output is too low, and price is too high for equilibrium
4. Output is too high, and price is too low for equilibrium

 

5. Private firms are not likely to fund the socially optimal level of basic research because basic research:

1. Yields benefits that cannot be measured in dollars
2. Provides long term but not short term benefits
3. Produces benefits to society as a whole, including those who do not pay for it
4. None of the above – when free, the market will provide the optimal amount of research.

 

6. Private goods are:

1. Excludable
2. Non-rival
3. Subject to diseconomies of scale
4. Consumable by additional users without making existing users worse off.

 

7. Public goods are:

1. Both excludable and rival
2. Excludable but not rival
3. Rival but not excludable
4. Neither excludable nor rival.

 

 

Answer 1

It's mandatory to answer only first four MCQ

1) option A)

A drought is a natural disaster & not an externality

2) option D)

At eqm, MB = MAC( Marginal abatement cost)

3) option B)

SMC = PMC + Marginal external cost

4) option A).

As P = PMC = 10, so market in eqm

But as SMC > PMC , so lower output will benefit society

5) option C)

Research benefits all, & all beneficiaries aren't required to pay anything

Thus private returns to research tends to fa

6) option A)

Private goods are excludable & rival in nature

7) option D)

Public goods are non-excludable & non- rivalrous in nature

its mandatory by chegg policy to answer only first four MCQ