39) Refer to the figure above. After the minimum P2 is imposed, A) some consumers are better off and all producers are worse off. B) some consumers and some producers are better off. C) no consumers are better off but some producers are better off. D) no consumers are better off and all producers are better off. 40) Governments may successfully intervene in competitive markets in order to achieve economic efficiency: A) at no time; competitive markets are always efficient without government intervention. B) to increase the incidence of positive externalities. C) in cases of positive externalities only. D) in cases of negative externalities only. E) in cases of both positive and negative externalities.
Added by Sheila T.
Close
Step 1
This means that the minimum price P2 is set above the equilibrium price, causing a decrease in consumer surplus and an increase in producer surplus. Some consumers who are willing to pay the higher price P2 are able to purchase the good, so they are better off. Show more…
Show all steps
Your feedback will help us improve your experience
Rachel Gore and 70 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
1. A. If the production of a good yields a negative externality, then the social-cost curve lies (above, below) the supply curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each.) B. If the production of a good yields a positive externality, then the social-value curve lies to the (left, right) of the demand curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each) C. With government intervention, a market will tend to (over, under) supply products that produce positive externalities. Whereas with negative externalities, a market will tend to (over, under) supply products when there is no government intervention. (Circle the correct answer for each.)
Jennifer S.
Negative externalities lead markets to produce a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels. b. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels. c. greater than efficient output levels and positive externalities lead markets to produce efficient output levels. d. efficient output levels and positive externalities lead markets to produce greater than efficient output levels.
With the help of the graph, it is observed that the marginal private benefit of the good is $95 and, due to a positive externality, the marginal benefit to society is $125. In this case, the marginal external benefit created by the positive externality is $. In the graph, represents a deadweight loss. The deadweight loss the foregone benefit to society of the externality. Positive externality will occur when A. the marginal social benefit is equal to marginal private benefit B. the marginal social benefit is equal to deadweight loss C. the marginal social benefit is greater than the marginal cost to produce at the market equilibrium D. the marginal social benefit is equal to marginal social cost to produce at the market equilibrium Which of the following statements is true regarding pecuniary externalities? A. It is a branch of the negative externality. B. It causes market inefficiencies. C. It leads to wrong equilibrium quantities. D. It affects other people only through market price.
Andrew D.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Watch the video solution with this free unlock.
EMAIL
PASSWORD