Dante Goodwyn

Professor Halim
Questions on Ch 4 and 7

Page 150

1. True
2. B
3. B
4. A
5. C

Second Picture Discussion Questions

3. The public provision goods may be provided by the government which may make this a free
process, however private provision goods are not free, and people will be required to pay for
their own goods. In my perspective this free rider problem tends to make people become lazy
and not do their fair share for the economy.

4. The divergences that arrive between equilibrium output and efficiency output is when there
is an equal amount of supplied and amount wanted with positive externalities there is not
enough of the produced which makes a surplus. Efficiently output is when there is the most
output made with the least amount of an input into it. For example, if both negative and
positive externalities occur for this, the output cannot be reached. In my perspective an
example of external benefit would be taking the bus to reduce congestion as well as energy on
the roads on a day to day basis.

5. Benefits and spillover costs are called negative and positive externalities because spillover
costs are external to the participants and negatively affect the utility of the third party.
Graphically when externality is corrected with tax the supply is increased with the the demand
remaining the same causing an increase in prices however there may be a decrease in quantity.

Page 149

2. Ms Simpson is not buying the maximum combination of bread and milk. However in order to
get the maximum combination in this situation she would need to increase the MU of bread to
cause the equation of MU/Price of milk =MU/ Price of bread to equal out.
 Review questions Part 4

5-

A- French fries are private because it is a personally bought good in life

B- Airport Screening is a public good because everyone must use it while not paying for it
because it is funded through the government.

C- Court system is a public good because everyone has a right to going to court and having trail
which is also funded through the government

D- Medical care may also be another example of both because you can pay for a private health
care or you can claim government issued health coverage that is paid for by the government.

E- Lastly I think mail delivery id a private good due to the fact that you can buy a stamp in order
to ship something off as well as you must pay for shipping and handling.

6-

A Negative

B Positive

C Negative

D Negative

E Negative