Unit 6 check
Unit 6 check: Market Failure and the Role of Government
10 questions from 5 lessons in Unit 6. Answer each one, and if you miss, follow the link back to where it is taught, then try again. Your score counts first tries.
Question 1 · from 6.1 · Calculate
For units 1 to 6 of a good, the marginal benefits are $16, $14, $12, $10, $8 and $6, and the marginal costs are $4, $6, $8, $11, $14 and $17. How many units maximize total economic surplus?
Question 2 · from 6.2 · Calculate
In a perfectly competitive market for cement, marginal private benefit is P = 30 − 0.5Q and marginal private cost is P = 6 + 0.5Q, with P in dollars a ton and Q in thousands of tons. Dust from making each ton imposes an external cost of $4 on nearby residents, and there is no external benefit. What is the socially optimal quantity, in thousands of tons?
Question 3 · from 6.3 · Multiple choice
Anyone may fish in Crane Lake, and every fish caught is one fewer for everyone else. Why do the people who fish there take more fish than is efficient?
Setup for question 4
Ridgeline Mill is the only employer in a remote town and pays all its workers the same wage. The table shows the wage it must offer to get each number of workers, and each worker's marginal revenue product. With no minimum wage, the mill hires 4 workers at $32 an hour. Under a minimum wage, the mill must pay every worker at least that wage, and it can hire as many workers as are willing to work at it.
| Workers | Wage needed per hour | MRP of that worker per hour |
|---|---|---|
| 1 | $20 | $80 |
| 2 | $24 | $70 |
| 3 | $28 | $56 |
| 4 | $32 | $46 |
| 5 | $36 | $38 |
| 6 | $40 | $30 |
Question 4 · from 6.4 · Calculate
The town sets a minimum wage of $36 an hour. How many workers does Ridgeline hire to maximize profit?
Setup for question 5
The state of Lakeshire taxes income in two brackets. Every taxpayer pays the first rate on the part of their income up to $40,000, and the second rate only on the part above $40,000.
| Part of income | Tax rate on that part |
|---|---|
| Up to $40,000 | 10% |
| Above $40,000 | 25% |
Question 5 · from 6.5 · Calculate
How much income tax, in dollars, does a Lakeshire taxpayer with an income of $100,000 owe?
Question 6 · from 6.1 · Decide and justify
Dry cleaners in Clearwater sell in a perfectly competitive market. The solvent fumes from their machines make neighbors sick, a cost that no cleaner and no customer pays. Is the market quantity of dry cleaning the socially optimal quantity?
Which reason supports your choice?
Question 7 · from 6.2 · Multiple choice
Steel mills in a perfectly competitive market send smoke over nearby towns, an external cost of $25 for every ton of steel at every quantity. Which per-unit tax on steel would move the market to the socially optimal quantity?
Setup for question 8
Use the two questions on a good the lesson has not shown.
Question 8 · from 6.3 · Decide and justify
Pine Lake's town beach is free and open to anyone. On summer weekends it is so crowded that each new visitor leaves less room on the sand for everyone else. Is the beach on those weekends a public good?
Which reason supports your choice?
Uses the same setup as question 4, above.
Question 9 · from 6.4 · Multiple choice
Compared with no minimum wage, what does the $36 minimum wage do at Ridgeline Mill?
Uses the same setup as question 5, above.
Question 10 · from 6.5 · Calculate
What is the average tax rate, as a percentage of income, for a Lakeshire taxpayer with an income of $100,000?
0 of 10 answered.