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11. Explain a specific situation in which equity and efficiency are conflicting goals. In the situation you described, would you be willing to sacrifice some efficiency to gain more equity? Why or why not?2. Identify whether each of the following statements refers to a problem caused by a positive externality, a negative externality, imperfect information, imperfect competition, a public good, or none of the above: a. Society would be better off if more people wore smiley-face T-shirts, which brighten the moods of the people who see them. b. People pay too much for Lame-brand T-shirts because consumers don't realize the shirts will fall apart after three weeks. c. Too few people pitch in to purchase bat houses that attract mosquito-eating bats to their neighborhood. Instead, residents hope to benefit from mosquito eradication efforts paid for by others. d. People buy too many / v New York T-shirts because the market price doesn't include the pollution costs of making and shipping the shirts. e. The only grocery store in a small town charges more than $7 for a quart of orange juice.3. Identify the source of market failure addressed by each of the following remedies: a. Copayments made by insurance customers b. Antitrust legislation c. The pre-purchase of mechanical checkups for used cars d. Subsidies e. The Federal Trade Commission f. Cap-and-trade programs g. Public education4. Suppose the strings of holiday lights used to decorate yards are produced in a perfectly competitive market and that each string purchased creates a positive externality of $1 due to its visual appeal to neighbors. a. Draw a hypothetical graph for the holiday light market with an upward-sloping supply curve and a downward-sloping demand curve. Label the following: i. marginal private cost curve ii. marginal social cost curve iii. marginal private benefit curve iv. marginal social benefit curve v. market price vi. equilibrium quantity vii. socially optimal quantity b. Explain how the graph would change if all holiday lights were strung indoors where neighbors couldn't see them.5. The Urban Dictionary defines second-hand rap as the "phenomenon created when some idiot with a loud car stereo believes the entire community would like to have their own music, conversations, or inner peace drowned out by . . . the sound of a car 37 being vibrated apart." Suppose loud car stereos are produced in a perfectly competitive market and that each stereo creates a negative externality of $50. a. Draw a hypothetical graph for this market with an upward-sloping supply curve and a downward-sloping demand curve. Label the following: i. marginal private cost curve ii. marginal social cost curve iii. marginal private benefit curve his iv. marginal social benefit curve v. market price vi. equilibrium quantity vii. socially optimal quantity b. Describe two specific remedies that could bring about the socially optimal quantity of loud car stereos.7. Policy making to remedy market failure requires the government to estimate values such as marginal private costs, marginal private benefits, marginal external costs, and marginal external benefits. Indicate which of these values must be estimated correctly in order to allocate resources efficiently using each of the following approaches. a. Taxes used to correct for a negative externality b. Subsidies used to correct for a positive externality C. A government provision of public goods that does not cause externalities d. Limits on the quantity of a private good that causes negative externalities