PARTI: TRUE/FALSE/UNCERTAIN EXPLAIN (6 x 10 = 60 MARKS) Answer all 6 questions as TRUE, FALSE or UNCERTAIN and provide a

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Parti True False Uncertain Explain 6 X 10 60 Marks Answer All 6 Questions As True False Or Uncertain And Provide A 1 (64.73 KiB) Viewed 20 times

PARTI: TRUE/FALSE/UNCERTAIN EXPLAIN (6 x 10 = 60 MARKS) Answer all 6 questions as TRUE, FALSE or UNCERTAIN and provide a short explanation. Your mark will depend heavily on your explanation. Answers without an explanation receive a mark of 1) We know from the first welfare theorem of economics that prices determined in perfectly competitive markets yield efficient allocations of resources. We know from the second welfare theorem of economics that these prices also yield socially desirable distributions of resources. 2) A monopolist that sells q "Chia Pets" faces a demand curve P-100- and has total costs C(q)-6*4. The monopolist maximizes profits by producing q=50. 3) Private goods are things you like to consume in the privacy of your own home, whereas public goods are things you like to consume out in public 4) Externalities are no big deal, since even when they are present, market outcomes are Socially Efficient. 5) The citizens of two countries, Minima and Maxima, dislike citizens from the other country and all else equal, would like to drop bombs on the other country. After 50 years both countries have substantial arsenals of bombs but have never dropped a bomb on each other. Recognizing the madness of the situation, the President of Maxima suggests to the President of Minima, that they agree to destroy their arsenals of bombs and never produce any more bombs. Clearly, this agreement will lead to disarmament and a peaceful co-existence between the two countries. 6) In a situation where one business's output generates pollution that harms a second business 2 located nearby, a government can impose a tax on the output of the polluting firm to achieve the socially efficient levels of outputs and profits. The Government can also encourage the firms to merge and thereby maximize joint profits to achieve the socially efficient levels of output and profits. So long as the outcome is socially efficient then society doesn't care which one the government chooses.