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Each multiple question is worth of 0.1 points. Scenario 1 Consider the information below: For Group A the cost of attaining an educational level y is C.(y) = $6,000y and for Group B the cost of attaining that level is Cy(y) = $10,000y. Employees will be offered $50,000 if they have y y*. 1. Refer to Scenario 1. The highest level of y* that can be set and still have the high-productivity people choose to meet it is a. 16. b. 13 1/3 c. 13. d. 8. . 2. Refer to Scenario 1. The lowest level of y* that can be set and still have only the high- productivity people meet it is b. 13 1/3 C. 13 d8 CO 3. Refer to Scenario 1. If the threshold educational level y* is set at 10 a. b. C. d. e. only individuals in Group A will attain it. only individuals in Group B will attain it. individuals in both groups will attain it. no individuals will attain it. some fraction of individuals in each group will attain it. 4. Refer to Scenario I. If the threshold educational level y is set at 7. a. only individuals in Group A will attain it. b. only individuals in Group B will attain it. e individuals in both groups will attain it. no individuals will attain it. some fraction of individuals in each group will attain it. 5. Refer to Scenario 1. If the threshold educational level y* is set at 14, only individuals in Group A will attain it. b. only individuals in Group B will attain it. individuals in both groups will attain it. no individuals will attain it. e some fraction of individuals in each group will attain it. d. 6. Refer to Scenario I. An employer who only wants to hire individuals who find learning less costly can do so by choosing y* to be anywhere between a. 7 and 14. b. 8 and 13 1/3 c. 10 and 16. d. 13 1/3 and 20. e. 14 and 20. 7. Externalities a. are not reflected in market prices, so they can be a source of economic inefficiency. b. do become reflected in market prices, so they can be a source of economic inefficiency. c. are not reflected in market prices, so they do not adversely affect economic efficiency d. do become reflected in market prices, so they do not adversely affect economie efficiency may or may not become reflected in market prices, but do not have an impact on economie efficiency in either event. 8.Constructing plastic containers produces air pollutants. Therefore, in the market for plastic containers the marginal social cost curve is above and to the right of the demand curve. b. the marginal social cost curve is below and to the left of the demand curve. c. the marginal social cost curve is above and to the left of the supply curve. d the marginal social cost curve is below and to the right of the supply curve. there is a gap between quantity supplied and quantity demanded in equilibrium b. the marginal social cost curve is below and to the left of the demand curve. c. the marginal social cost curve is above and to the left of the supply curve. d. the marginal social cost curve is below and to the right of the supply curve. e. there is a gap between quantity supplied and quantity demanded in equilibrium. 9. Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, equilibrium price and output are too low to be optimal. and output are too high to be optimal. c. is too low to be optimal, and equilibrium quantity is too high d. is too high to be optimal, and equilibrium quantity is too low. e. is optimal, but there is an excess supply. 10. To find the social marginal benefit of public goods, one needs to sum the consumers' demand curves vertically b. sum the consumers' demand curves horizontally C. sum the marginal private benefit and the marginal external benefit for each unit. sum the marginal private cost and the marginal external cost for each unit. subtract the individual portion of the tax burden necessary for the government to provide the good from the demand curve of each consumer who desires the good. 11. (3 points) The market for paper in a particular region has the supply and demand curves: Qo = 160,000 - 2,000P Qs = 40,000 + 2,000P, where Q is measured in hundred-pound lots, and P is price per hundred-pound lot. There is currently no attempt to regulate the dumping of effluent into streams and rivers by the paper mills. As a result, dumping is widespread. The marginal external cost associated with the paper production is given by the expression: MEC -0.00020 Calculate the competitive price and output, assuming that no attempt is made to monitor or regulate the dumping of effluent. Determine the socially optimal levels for price and output. If your answers in (a) and (b) are different, explain the source of the difference. Sketch a diagram showing the costs or benefits to society of allowing the market to operate in an unregulated fashion

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