AP Microeconomics: Unit 6: Market Failure and the Role of Government

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Question 7 · Unit 6: Market Failure and the Role of Government · challenge

In a competitive market, marginal private benefit is 50 - Q and marginal private cost is 10 + Q, in dollars per unit. Production imposes a constant $8 marginal external cost, with no external benefits. Output is continuous. Which quantity and per-unit corrective tax achieve efficiency in this model?A. Q = 16; tax = $8B. Q = 20; tax = $8C. Q = 24; tax = $0D. Q = 16; tax = $16

Question 11 · Unit 6: Market Failure and the Role of Government · challenge

Consumption has marginal private benefit MPB = 40 - Q and constant marginal external benefit $12 per unit. Marginal private and social cost both equal 4 + Q. In a competitive market with continuous output and no other distortions, which quantity is efficient and which per-unit consumption subsidy implements it?A. Q = 18; subsidy $12B. Q = 24; subsidy $6C. Q = 30; subsidy $12D. Q = 24; subsidy $12

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