Use the Following to Answer Questions

question 160

Multiple Choice

Use the following to answer questions:
Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep.
-(Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. The community decides that given all the benefits of lawn upkeep, it is important to maintain the socially optimal number of lawn upkeep hours. To achieve this, the community will:

• A) require community lawn service of 45 hours.
• B) subsidize everyone who contributes to lawn upkeep with a payment of $15.
• C) implement a Pigouvian lawn tax of $65.
• D) provide no additional funds to lawn upkeep.

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Definitions:

Credit Markets

Financial markets where borrowers can obtain funds from lenders, typically through the issuance of debt securities or loans.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.

Increased Unemployment

A rise in the percentage of the labor force that is without work but available for and seeking employment.

Social Security

A government program that provides financial assistance to people with an inadequate or no income, primarily the elderly, disabled, and unemployed.