UNIT 06 / MARKET FAILURE AND THE ROLE OF GOVERNMENT

Externalities6.2 test

100 questions with explanations after each answer.

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QUESTION 01 / 100Easy

Based on the figure below, the market produces Qm rather than Qs because producers consider

QUESTION FIGURE

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Quantity is on the horizontal axis and marginal benefit and marginal cost are on the vertical axis. Demand is labeled MPB = MSB. MPC lies below MSC, and Qm at MPB = MPC is to the right of Qs at MSB = MSC. The vertical gap is labeled marginal external cost.

Select one answerAAverage social cost rather than marginal costBOnly consumer surplus rather than revenueCMarginal social cost rather than marginal private costDPrivate cost rather than full social costEMarginal external benefit rather than private benefit

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Question 1