Economics Question Concerning Graphs of Unregulated Markets?

Question

http://speedway.its.utexas.edu/speedway-files/college/eco304k/L15Q14.gif

in unregulated market, portrayed in the graph in the link above, (a) how many units are produced? (b) Will they produce more or less than the efficient amount? At the equilibrium output level, the marginal social cost of production is (c) (less than, more than, or equal to?) marginal benefit to consumers? At the equilibrium output the marginal external cost is (d) _____? In order to promote an efficient allocation of resources, the government could impose an excise tax equal to (e)_____? if an excise tax is imposed that generates an efficient allocation of resources, then the output level will be (f)__?

The total benefit of a public good .

1. is the total dollar value placed on it by all citizens

2. is the dollar value placed on it by the citizen who values it the most

3. is the dollar value placed on it by the median voter

4. is the benefit from producing an additional unit

my text book simply says, a person.

Answer 1

(a) how many units are produced? MC = MB: 250 units.

(b) Will they produce more or less than the efficient amount?

The production exceeds the socially optimal amount.

At the equilibrium output level, the marginal social cost of production is (c) (more than) the marginal benefit to consumers.

At the [unregulated] equilibrium output the marginal external cost is (d) $150.

In order to promote an efficient allocation of resources, the government could impose an excise tax equal to (e) $50. [which raises the price from $150 to $200 per unit, thereby reducing the quantity demanded (see below)]

if an excise tax is imposed that generates an efficient allocation of resources, then the output level will be (f) 150 units.

The total benefit of a public good is the total dollar value placed on it by all citizens. Answer 1 is correct.