1. A project has a social cost of $100 million, a private cost of $40 million and an external benefit of $20 million. Its net social value is zero.
What can be concluded about the project?
A External cost is greater than external benefit.
B Private cost is greater than external cost.
C Private cost is greater than private benefit.
D Social cost is greater than social benefit.
2. The diagram shows the cost and revenue curves for a firm.
At which price does allocative efficiency occur?
3. A government is considering improving the rail links in its country. It also has to choose one of
four high-speed routes.
The benefits and costs of each route are shown below.
Which route should be chosen?
|Private benefits ($bn)||External benefits ($bn)||Private costs ($bn)||External costs ($bn)|
4. The table shows the total utility gained by a consumer as they consume more apples.
|Apples consumed||Total utility|
At which level of consumption would the marginal utility be zero?
A 1 B 4 C 5 D 6
5. In the indifference curve diagram point M is the consumer’s initial equilibrium, JK and JL are
budget lines and MN is the substitution effect of a fall in the price of good X.
If good X is a Giffen good, which point will be the consumer’s new equilibrium point after the fall
in the price of good X?