Question 5 0/ 1pts The supply and demand schedules for gasoline in the country of Drivia are given in the table below. Initially, there are no taxes on gasoline. Assume that the externality damage from consuming gasoline in Drivia is 30 cents per gallon. If Drivia instituted an optimal Pigovian tax on gasoline, what would be the new equilibrium price? Quantity Supplied | Quantity Demanded Price Per Gallon| Gallons/Day Gallons/Day $3.50 45,000 135,000 $3.60 50,000 125,000 $3.70 55,000 115,000 $3.80 60,000 105,000 $3.90 65,000 05,000 $4.00 70,000 85,000 $4.10 75,000 75,000 $4.20 80,000 65,000 $4.30 85,000 55,000 $4.40 90,000 45,000 $4.50 4.4 The marginal benefits of wildlife habitat preservation in a society with just two individuals, Katya and Miguel, are given in the table below. Suppose that wildlife preservation costs $50 per acre. How many acres of wildlife habitat should be preserved in this society? Katya's marginal benefits Miguel's marginal benefits Acres of wildlife habitat [T ITTTas (dollars) (dollars) 1 50 30 2 40 25 3 30 20 4 20 15 5 10 10 & 0 5 3 Question 4 0/1pts The marginal benefits of wildlife habitat preservation in a society with just two individuals, Katya and Miguel, are given in the table below. Suppose that wildlife preservation costs $50 per acre. What policy below would achieve the efficient provision of wildlife habitat? Katya's marginal benefits Miguel's marginal benefits Acres of wildlife habitat (dollars) (dollars) 1 50 30 2 40 25 3 30 20 4 20 15 5 10 10 6 0 5 The competitive market equilibrium will allocate this resource efficiently. A tax of $25 each for Katya and Miguel. A tax of $75 each for Katya and Miguel A tax of $50 per acre for both Katya and Miguel. Incorrect Question 5 0 / 1 pts The marginal benefits of wildlife habitat preservation in a society with just two individuals, Katya and Miguel, are given in the table below. Which individual do you think would be most willing to support the policy proposed in question 3? Katya's marginal benefits Miguel's marginal benefits Acres of wildlife habitat (dollars) (dollars) 50 30 N 40 25 30 20 20 15 10 10 6 5 O Katya, because her net benefit of preservation is greater. O Miguel, because his net benefit of preservation is greater. O There is not enough information given to answer the question. O Neither, because the cost of preservation is greater than the total benefit for both Katya and Miguel. Incorrect Question 6 0 / 1 pts An underground aquifer in a developing country is available to all farms in a small community. It costs 50 dollars per farm per day to operate a pump that can extract groundwater from the aquifer. The value that a farm can obtain by using or selling the water depends on how many farms extract water. Assuming there is no regulation of the aquifer, how many farms will extract groundwater? Number of Farms Marginal Private Marginal Social Marginal Private Margina Extracting Water Benefit Cost Cost Social Cast 100 50 100 50 100 50 Marginal Private 90 90 Cost BO 100 8 8 8 70 110 120 Marginal Private 50 130 Benefit 140 150 3 10 Nursbar of Farms Extracting Groundwater 5 Incorrect Question 7 0 / 1 ptsAn underground aquifer in a developing country is available to all farms in a small community. Assume that it costs 50 dollars per farm per day to operate a pump that can extract groundwater from the aquifer. The value that a farm can obtain by using or selling the water depends on how many farms extract water. What would be the economically efficient number of farms extracting water? $160 $140 Number of Farms Marginal Private Marginal Social Marginal Private Extracting Water Benefit Cost Cost 8 8 8 8 8 8 8 Benefit Number of Farm's Extracting Groundwater " 3 ct Question 8 0 / 1 pts The graph below depicts the market for an artificially scarce good. What area(s) represent the total social welfare in this market at a price of $50? Price 200 Demand (WTP) A 50 B C Quantity O B+C OA OB OC O A+BThe graph below depicts the market for an artificially scarce good with a price of $507 What area(s) represent the potential welfare gain in the market achievable at a different price? Price 200 Quantity A+B B+C The are no potential gains in surplus available in this market. B Question 4 0/1pts For the perfectly competitive firm with the cost schedule below, how much profit would the firm earn if the price of bicycles dropped to $100 and the firm produced the profit-maximizing number of bicycles at the new price? Quantity of Bicycles Total Cost ($) 75 At a price of $100, the firm's profit equals $100. At a price of $100, the firm's profit equals $250. At a price of $100, the firm's profit equals $75. At a price of $100, the firm would earn zero economic profit. At a price of $100, the firm is operating at a loss. Incorrect Question 5 0/1pts For the perfectly competitive firm with the cost schedule below, would firms enter or exit the market when the price of bicycles is $100? Quantity of Bicycles Total Cost ($) 75 At a price of $100, firms will both enter and exit the market At a price of $100, firms will exit the market At a price of $100, no firms will enter or exit the market At a price of $100, firms will enter the market Question 8 0/1pts The graph below illustrates the cost structure of an idealized perfectly competitive seed-producing firm. If the market-determined price of seed packets is currently $0.60, which of the following is true? Marginal 2 Cost 0 1220 e e i o e = B B 090 f--mmmmmma Average Total Cost ?% Average 060 '''''' g o 0 0 20 40 60 80 100 120 Quantity of Seed Packets The market for seed packets is in long-run competitive equilibrium. We would expect new firms to enter this market, in order to take advantage of the economic profits. No firms would stay in this industry, since the price is so low. We would expect prices in this market to rise in the future, as the exit of firms decreases market supply. Incorrect Question 9 0/1pts The graph below illustrates the cost structure of an idealized perfectly competitive seed-producing firm. When the market is in long run competitive equilibrium, this firm will produce Cost and Price (S) Marginal Cost 1.20 = 0.90 Average Total Cost Average 0.60 Variable Cost 0 0 20 40 60 80 100 120 Quantity of Seed Packets about 60 seed packets between 80 and 100 seed packets no seed packetsit will go out of business more than 100 seed packets Question 10 0/1pts The graph below illustrates the cost structure of an idealized perfectly competitive seed-producing firm. When the market is in long run competitive equilibrium, the price of seed packets will be -~ Aarginal - Cost o 1.20 = & 0.90 Average Total Cost ?:u Average 0.60 g O 0 0 20 40 60 80 100 120 Quantity of Seed Packets 90 cents. anywhere between 60 and 90 cents. 60 cents. $1.20. anywhere between 90 cents and $1.20