Why does the presence of negative externalities in the production of a good lead to an overproduction of the good?
What will be an ideal response?
If the production of a good generates negative externalities, the marginal social cost of producing the good exceeds the marginal private cost of producing the good. However, the producers of the good do not take this external cost into account and continue producing as long as the marginal private benefit from production exceeds the marginal private cost. This leads to an overproduction of the good.
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The analysis of how a customer's tastes for cars will change when his wealth triples is under the scope of:
A) ordinal study. B) comparative statics. C) marginal research. D) Pareto analysis.
Air pollution caused by lead
A) has never been a pollution problem. B) is currently a major pollution problem. C) has mostly been eliminated as a pollution problem. D) is the number one source of pollution today.
Refer to Figure 5-12. One way to obtain the economically efficient amount of college education is for governments to subsidize college education
What is the size of the per-student Pigovian subsidy that the government must provide to internalize the external benefits? (Note that the subsidy can be granted to the education institutions or to the students directly or indirectly; for example, through low-interest student loans.) A) P2-P1 B) P1 C) P2-P0 D) P0-P1
The prototype of suburban tract development was in
A. San Luis Obispo, California. B. Camden, New Jersey. C. Butte, Montana. D. Levittown, New York.