1. (3 points) In the absence of market failure, perfectly competitive markets are efficient. 2. (4...

 

 

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1. (3 points) In the absence of market failure, perfectly competitive markets are efficient. 2. (4 points) An optimal allocation of resources is "fair". 3. (5 points) The federal government is considering an environmental project that has the following streams of benefits and costs over 5 years. If the social discount rate is 4%, the government should proceed with the project. Year 0 1 2 3 4 5 Sum Benefits ($) 0 60,000 60,000 60,000 60,000 60,000 300,000 Costs ($) 180,000 20,000 20,000 20,000 20,000 20,000 280,000 Net Benefit -180,000 40,000 40,000 40,000 40,000 40,000 20,000 4. (3 points) The Treasury Board of Canada Secretariat recommendation to use an 8% discount rate when performing cost-benefit analysis is unlikely to raise protests from conservationists. 5. (3 points) If a monopoly is producing a product that generates a negative externality and the external cost equals the monopolist's per-unit profit at the profit-maximizing quantity, then the monopoly is producing the socially optimal quantity. 1. (3 points) In the absence of market failure, perfectly competitive markets are efficient. 2. (4 points) An optimal allocation of resources is "fair". 3. (5 points) The federal government is considering an environmental project that has the following streams of benefits and costs over 5 years. If the social discount rate is 4%, the government should proceed with the project. Year 0 1 2 3 4 5 Sum Benefits ($) 0 60,000 60,000 60,000 60,000 60,000 300,000 Costs ($) 180,000 20,000 20,000 20,000 20,000 20,000 280,000 Net Benefit -180,000 40,000 40,000 40,000 40,000 40,000 20,000 4. (3 points) The Treasury Board of Canada Secretariat recommendation to use an 8% discount rate when performing cost-benefit analysis is unlikely to raise protests from conservationists. 5. (3 points) If a monopoly is producing a product that generates a negative externality and the external cost equals the monopolist's per-unit profit at the profit-maximizing quantity, then the monopoly is producing the socially optimal quantity.