Table 10-1

$$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c }
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c }
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. Which of the following statements is correct?
A)If the external cost per unit of output were $0 instead of $4, then the socially efficient quantity of output would be 6 units.
B)A tax of $8 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output.
C)Taking the external cost into account, total surplus declines when the 5th unit of output is produced and consumed.
D)The market for flowers is a market to which the concepts in this table apply very well.

Question

Table 10-1
​
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Private Value } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Private Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { External Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 28 & 12 & 4 \
\hline 2 & 26 & 14 & 4 \
\hline 3 & 24 & 16 & 4 \
\hline 4 & 22 & 18 & 4 \
\hline 5 & 20 & 20 & 4 \
\hline 6 & 18 & 22 & 4 \
\hline 7 & 16 & 24 & 4 \
\hline
\end{array}$$
-Refer to Table 10-1. Which of the following statements is correct?
A)If the external cost per unit of output were $0 instead of $4, then the socially efficient quantity of output would be 6 units.
B)A tax of $8 per unit would enable this market to move from the equilibrium quantity of output to the socially optimal level of output.
C)Taking the external cost into account, total surplus declines when the 5th unit of output is produced and consumed.
D)The market for flowers is a market to which the concepts in this table apply very well.

Quizplus · Accepted Answer

The socially efficient quantity of output is determined by comparing the private value to the sum of private and external costs. For the 5th unit, the private value ($20) equals the private cost ($20), but when the external cost ($4) is included, the total cost ($24) exceeds the private value, indicating a decline in total surplus.

Table 10-1 ​ -Refer to Table 10-1

Table 10-1
-Refer to Table 10-1