Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 11, Problem 5PA
Subpart (a):
To determine
Public goods.
Subpart (b):
To determine
Number of movies need to rent.
Subpart (c):
To determine
Total cost and surplus.
Subpart (d):
To determine
Public goods and benefits.
Subpart (e):
To determine
Public goods and incentives.
Subpart (f):
To determine
Public goods and incentive.
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Which of the following is true?
A. the firm produces based on the private marginal benefit and private marginal cost
B. the welfare of the society is maximized if the sum of the private and social marginal benefits is equated with the sum of the private and social marginal costs
C. there is an overproduction of goods with negative externality or an underproduction of goods with positive externality because the social costs and social benefits are not considered in the production decisions of the firm
D. all are true
E. none is true
Explain 'negative externalities,' defined in class as 'hidden costs' making the difference between the 'public market price' and the 'true price' of a product. Illustrate using an example of a product with a negative externality
Suppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve?
A.Multiply the two demand curves together
B.Add their demand curves together
C.Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public good
D.Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public good
Chapter 11 Solutions
Principles of Microeconomics
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