ECON 1B03 Study Guide - Midterm Guide: Coase Theorem, Price Ceiling, Pencil
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ECON 1B03 Full Course Notes
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Make sure you carefully fill in the bubbles. You must fill in your student number, and version. Number on the scan sheet or your grade will not be recorded. Hand in the scan sheet and this test copy. Identify the letter of the choice that best completes the statement or answers the question. ___: externalities cause markets to fail to allocate resources efficiently, cause price to be different than the equilibrium price, benefit producers at the expense of consumers, cause markets to operate more equitably. ___: when negative externalities are present in a market, producers will be affected, but not consumers, overproduction will occur, demand will be too high. Figure 1 the market will still maximize total benefits: refer to figure 1. Which price and quantity combination represents the social optimum for this market: p1 and q1, p2 and q2, p2 and q1, p3 and q1. Interested parties can reach an outcome in which everyone is better off.
