Question

question 35
an external cost is created when you
○ buy flowers for your mother on mothers day.
○ graduate from college.
○ buy a sandwich for lunch.
○ litter on the side of the road.

question 36
which of the following conditions holds in an economically efficient competitive market equilibrium?
○ the marginal benefit of the last unit produced and consumed is maximized.
○ the deadweight loss is positive but at a minimum.
○ producer and consumer surplus are exactly equal in size.
○ there are no positive and no negative external effects from consumption and production.

Explanation:

Question 35

An external cost (negative externality) is a cost imposed on third parties not involved in a transaction. Littering on the road imposes costs like environmental degradation, cleanup costs on others. Buying flowers, graduating, or buying a sandwich don't impose external costs on unrelated parties.

In an economically efficient competitive market equilibrium, there are no external effects (positive or negative) because externalities cause inefficiency (deadweight loss). Marginal benefit isn't maximized (it equals marginal cost), deadweight loss is zero (not positive), and producer/consumer surpluses don't need to be equal—total surplus is maximized.

Answer:

D. litter on the side of the road.

Question 36