Author Question: Many residents of the city of Adelphia drive without automobile insurance. Assuming that Adelphia is ... (Read 118 times)

plus1 · **on:** Jun 29, 2018

Many residents of the city of Adelphia drive without automobile insurance. Assuming that Adelphia is just like any other city and these are risk averse individuals, which of the following is most likely TRUE?

A) Economic models do not work.
B) These people maximize wealth.
C) The price of automobile insurance exceeds their maximum value of insurance.
D) There are no automobile accidents or thefts in the city of Adelphia.

Question 2

Consider the production of some industrial good that involves air pollution. The table below gives the marginal social cost (MSC), the marginal cost (MC), and the marginal social benefit (MSB) for each level of output (Q).

Q MSC MC MSB
1 3 2 11
2 6 4 10
3 9 6 9
4 12 8 8
5 15 10 7
6 18 12 6

To arrive at the efficient market equilibrium the government could impose a tax of
A) 3.
B) 4.
C) 8.
D) 9.