1.) When the production of a good results in a positiveexternality, the social value curve is A...
Question:
1.) When the production of a good results in a positiveexternality, the social value curve is
A below the demand curve, indicating that the total value tosociety is less than the private benefit.
B above the demand curve, indicating that the total value tosociety is greater than the private benefit.
C identical to the demand curve, indicating that the total costto society is the equal to the private benefit.
D above the supply curve, indicating that the total cost tosociety exceeds the private cost.
2.) When Lisa drives to work every morning, she drives on acongested highway. What Lisa does not realize is that when sheenters the highway each morning she increases the travel time ofall other drivers on the highway. In this case, the external costof Lisa’s highway trip
A increases the social cost above the private cost.
B lowers the social cost below the private cost.
C increases the social value above the private benefit.
D decreases the social value below the private benefit.
3.) Suppose that a steel factory emits a certain amount of airpollution, which constitutes a negative externality. If the marketdoes not internalize the externality,
A the supply curve would adequately reflect the marginal socialcost of production.
B consumers will be required to pay a higher price for steelthan they would have if the externality were internalized.
C the market equilibrium quantity will not be the sociallyoptimal quantity.
D producers will produce less steel than they otherwise would ifthe externality were internalized.
4.) Flu shots provide a positive externality. Suppose that themarket for vaccinations is perfectly competitive. Withoutgovernment intervention in the vaccination market, which of thefollowing statements is correct?
A At the current output level, the marginal social benefitexceeds the marginal private benefit.
B The current output level is inefficiently low.
C A per-shot subsidy could turn an inefficient situationinto an efficient one.
D All of the above are correct.
5.) A local manufacturing plant that emitted sulfur dioxide wasforced to stop production because it did not comply with localclean air standards. This decision provides an example of
A a direct regulation of an externality.
B corrective taxes.
C a Coase theorem solution to an externality.
D the misuse of a subsidy.
Expert Answer:
1 When the production of a good result in a positive externality the social value curve is optionBab... View the full answer
