1. The figure below shows the market for a good with an external benefit. If the market is competitive and the government takes no action, the equilibrium quantity of ________ units is inefficient because ________.

10; marginal external benefit exceeds marginal social benefit

10; marginal cost exceeds marginal benefit

8; marginal cost exceeds marginal benefit

8; marginal social benefit exceeds marginal cost

10; marginal social benefit exceeds marginal benefit

2. A government subsidy

A. is a policy that can be used to help eliminate the deadweight loss from an external cost.

Both answers B and C are correct.

Both answers A and C are correct.

B. can help achieve an efficient amount of output when the good has an external benefit.

C. increases consumers' marginal benefit from the good.

3. Which of the following statements about health-care systems is correct?

Every major country except the United States has a comprehensive national health-care system.

Most major nations do not have extensive government-funded insurance programs.

In the United States, Medicare and Medicaid account for slightly less than 90 percent of total expenditures on health care.

Unlike other major nations, private health insurance is available only in the United States.

U.S. expenditure per person on health care is near the middle of the range of expenditures made in major nations.

4. In the used car market with no warranties, the equilibrium is a ________ and there is ________.

pooling equilibrium; inefficiency, partly because of over-supply of lemons

separating equilibrium; inefficiency, partly because of over-supply of lemons

separating equilibrium; no inefficiency

pooling equilibrium; no inefficiency

pooling equilibrium; inefficiency, partly because of over-supply of good cars