In case the government is experiencing a deficit in its budget, it resorts to borrowing to close the deficit. Can you explain to what extend public debt could have a positive or negative impact on society? Education is frequently cited as a source of external benefits. How? Production in the private market is inefficient. Why? What is the condition for efficiency in the output of public good? How is an efficient output identified graphically? PART II (Questions 4, 5, and 6) ILOs: A2, C2 The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 2 80 40 3 70 50 4 60 60 5 50 70 Suppose that this industry results in extreme externalities. What can be said about its optimal output? Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? What is the equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?
In case the government is experiencing a deficit in its budget, it resorts to borrowing to close the deficit. Can you explain to what extend public debt could have a positive or negative impact on society? Education is frequently cited as a source of external benefits. How? Production in the private market is inefficient. Why? What is the condition for efficiency in the output of public good? How is an efficient output identified graphically? PART II (Questions 4, 5, and 6) ILOs: A2, C2 The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 2 80 40 3 70 50 4 60 60 5 50 70 Suppose that this industry results in extreme externalities. What can be said about its optimal output? Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? What is the equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?
Chapter19: Public Choice And Special Interest Group Politics
Section: Chapter Questions
Problem 11QP
Related questions
Question
- In case the government is experiencing a deficit in its budget, it resorts to borrowing to close the deficit. Can you explain to what extend public debt could have a positive or negative impact on society?
- Education is frequently cited as a source of external benefits. How?
- Production in the private market is inefficient. Why? What is the condition for efficiency in the output of public good? How is an efficient output identified graphically?
PART II (Questions 4, 5, and 6)
ILOs: A2, C2
- The paper industry has the demand and supply curves shown below:
|
Price of paper |
Quantity demanded |
Quantity supplied |
|
2 |
80 |
40 |
|
3 |
70 |
50 |
|
4 |
60 |
60 |
|
5 |
50 |
70 |
- Suppose that this industry results in extreme externalities. What can be said about its optimal output?
- Draw the supply and demand curves for paper. Does the supply curve reflect the true
social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? - What is the
equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?
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