Quiz 2 2 #1

The presence of pollution in the trucking industry leads in the long run to dynamic inefficiencies because

Marginal private cost in trucking is lower than marginal social cost, so that some trucking firms remain in the industry (or are induced to enter) when efficiency calls for them to leave (or stay out)

A positive externality is shown by a marginal social benefit (MSB) curve that is

above and to the right of the demand curve for the good that generates it

A plastics factory emits water pollutants into a nearby river. The /marginal private cost of producing plastics and the marginal social cost of the pollutants are both constant with respect to the quantity of plastics produced. If the demand for plastics is downward sloping, what happens to the socially optimal level of output and market price if the demand curve for plastics shifts rightward

Optimal price remains unchanged, optimal quantity increases

to find the social marginal benefit of public goods, one needs to

Sum the consumers demand curves vertically

Because trucking as an industry involves the generation of pollutants in engine exhaust what happens to the demand or supply curve

the supply curve of trucking services understates the true cost of providing those services