Exam 16: Public Choices and Public Goods

-Attractive landscaping increases the property values of surrounding homes, creating a marginal benefit. The figure above represents the market for monthly landscaping contracts. a) What is the marginal social benefit of the 40th contract? Of the 60th contract? b) What is the marginal private benefit of the 40th contract? c) What is the marginal external benefit of the 40th contract? d) What is the unregulated competitive equilibrium price and quantity? e) What is the efficient quantity? f) What is the amount of the deadweight loss?

A common resource is ________ and ________.

The free-rider problem is the inability of private markets to achieve the efficient level of production of

-The figure above shows the market for polio vaccination in Africa. Polio vaccination confers an external benefit because one person's vaccination makes it less likely that other people will catch polio. a) If the market is competitive and left unregulated, how many doses of vaccine will be administered? b) If the Melinda and Bill Gates Foundation underwrites the cost of the vaccine by paying for a large fraction of the preparation and delivery cost, what will happen to the number of doses administered? Why?

-Vaccinations provide both private benefits and external benefits. The table above gives information on the marginal private benefit and marginal external benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, then the unregulated competitive equilibrium will have

-A city of 50,000 people is considering installing a sewage disposal system. The total fixed cost of the system is $100,000 per month. The marginal benefit to an average city resident from the first thousand gallons of capacity is 1.4 cents. The table shows the relationship between the system's capacity, its total cost, and the marginal benefit received by an average city resident: a) Draw the marginal social cost curve of the sewage system and the residents' marginal social benefit curve. What is the capacity that achieves maximum net benefit? b) How much will each person have to pay in taxes to support the efficient capacity level? c) What is the political equilibrium if voters are well informed?

Consider a market in which there is an external benefit. A private subsidy paid to producers can be used to arrive at the efficient market equilibrium because the subsidy will

Which of the following does NOT contain an externality?

When consumption is rival and excludable, the product is a

What are the differences between public goods and private goods?

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is

-The graph shows costs and benefits of a mosquito control program, which is a public good: a) What is the quantity of spraying that achieves efficiency? b) What is the political equilibrium if voters are well informed?

Michigan Radio is the state's most listened-to public radio service, attracting approximately 400,000 listeners each week and is funded through listener donations. If Michigan Radio suffers from the free-rider problem then the market would provide an ________ quantity of the public good.

For a public good, the marginal social benefit curve is the ________ summation of all the individual marginal benefit curves. For a private good, the marginal social benefit curve is the ________ summation of all the individual marginal benefit curves.

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in overproduction.

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the