Q2: From studying the following graph, we can say that: price P2 P1 Q1 E1 E2 MPC = MSC = S Q2 MSB = MPB + MEB MPB = D A- This graph represents a situation of a good or service that generates external cost. B- In this case, the government should intervene to encourage and increase production of these goods and services. C- Market equilibrium is determined at point E2, but efficiency condition is satisfied at E1. D- In this case, The Government should impose a corrective tax to reduce the produced quantity. E- None of the above. 38

Q2: From studying the following graph, we can say that: price P2 P1 Q1 E1 E2 MPC = MSC = S Q2 MSB = MPB + MEB MPB = D A- This graph represents a situation of a good or service that generates external cost. B- In this case, the government should intervene to encourage and increase production of these goods and services. C- Market equilibrium is determined at point E2, but efficiency condition is satisfied at E1. D- In this case, The Government should impose a corrective tax to reduce the produced quantity. E- None of the above. 38

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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