1) What is the price-quantity combination determined by the market? A. P4, Q2 B. P3, Q3 C. P2, Q2 D. P2, Q4 2) What is the private benefit of the last unit traded in the market? A. P1 B. P2 C. P3 D. P4 3) What is the private cost of the last unit traded in the market? A. P1 B. P2 C. P3 D. P4 4) What is the social value of the last unit traded in the market? A. P1 B. P2 C. P3 D. P4 5) What is the social cost of the last unit traded in the market? A. P1 B. P2 C. P3 D. P4 6) Which quantity is socially optimal (i.e. what is the efficient quantity)? A. Q1 B. Q2 C. Q3 D. Q4 7) What is the deadweight loss generated by the externality? A. A+B+C+D B. C+D C. C D. Zero

Price of high emissions S vehicles Py A B C - - - F 0 NO WO D - + - D Social - - Value - - - - Q , Q3 Qy Quantity of high emissions vehicles