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Positive Externalities Assignment

This document contains a positive externalities assignment consisting of 6 multiple choice questions and explanations about markets with external benefits like vaccination and education. The questions assess understanding of concepts like market failure, social optimum, and how government intervention can help correct market failure from external benefits. The assignment received a total of 34 marks.

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DanielSaleh
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206 views7 pages

Positive Externalities Assignment

This document contains a positive externalities assignment consisting of 6 multiple choice questions and explanations about markets with external benefits like vaccination and education. The questions assess understanding of concepts like market failure, social optimum, and how government intervention can help correct market failure from external benefits. The assignment received a total of 34 marks.

Uploaded by

DanielSaleh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Name: Date:

Mark: Comment:

(Total Marks: 34)

Positive Externalities Assignment

1.

The diagram shows the market for vaccination. There are no external costs and no government
intervention.

Which of the following is correct?

A: the market equilibrium output exceeds the social optimum output


B: there is an under-consumption of vaccinations
C: there are no external benefits
D: at the market equilibrium output, marginal social costs exceeds marginal social benefits.

Answer (1)
Explanation (3)

1
2. Which of the following methods of government intervention could help correct market failure?

A State provision of healthcare


B Taxation of goods which yield high external benefits
C Abolition of the tradable pollution permit scheme
D Provision of subsidies to goods which yield high external costs.

Answer (1)
Explanation (3)

2
3.

The diagram shows the market for university education. Assume there are no external costs. Which of the
following is true?

A: The free market equilbirium quantity exceeds the social optimum quantity
B: There is a market failure at quantity Qe
C: The triangle of welfare gain is XYV
D: The marginal external benefit remains constant at all quantities

Answer (1)
Explanation (3)

3
4.

The diagram shows a free market for vaccination in which the current equilibrium level of output is X and price
Pe. At this level of output there is

A: an external cost
B: market failure
C: an excess supply
D: government failure

Answer (1)
Explanation (3)

4
5.

The diagram shows the market for vaccinations. Assume there are no external costs. Which of the following
is true?

A: The free market equilibrium quantity exceeds the social optimum quantity.
B: The area of welfare loss is XTYZ
C: An increase in quantity from the free market equilbriumwill lead to a net welfare gain.
D: At the free market lequilbrium quantity, marginal social cost exceeds marginal social benefit.

Answer (1)
Explanation (3)

5
6.

6
Evaluate the likely private benefits and external benefits of education. Illustrate your answer with an
appropriate diagram (14)

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