Page 795 - Krugmans Economics for AP Text Book_Neat

Tackle the Test: Free-Response Questions
1. Suppose Austin and Ally are the only soccer enthusiasts in a 2. a. Identify and explain the two characteristics shared by
village where any number of public soccer clinics could be put every public good.
on by visiting experts for $80 each. There are no external costs b. Suppose a new resident moves to a community that
involved. Austin’s marginal private benefit curve for soccer purchases a public good for the benefit of every member
clinics is horizontal at $60. Ally’s marginal private benefit curve of the community. What is the additional cost of
is a straight line starting at $100 on the vertical axis and ending providing the public good to the new community
at 10 clinics on the horizontal axis. Draw a correctly labeled member? Explain.
graph for soccer clinics showing the marginal social cost, the Section 14 Market Failure and the Role of Government
marginal social benefit, and each resident’s marginal private
benefit. Label the quantity of clinics that Austin would
purchase if he were the only resident as Q Austin . Label the
quantity of clinics that Ally would purchase if she were the only
resident as Q Ally . Label the optimal quantity of clinics for
society as Q Optimal .

Answer (6 points):
Marginal
benefit,
marginal
cost
$160

100
80 MSC
MSB
60
MPB Austin

MPB Ally
Q Austin Q Ally Q Optimal 10
Quantity of soccer clinics
1 point: Correct axis labels (“Marginal benefit, marginal cost” or “Dollars per
unit” on the vertical axis, “Quantity of soccer clinics” or “Q” on the horizontal
axis)
1 point: MSC curve horizontal at a height of $80
1 point: MSB curve starts at a height of $160 where the quantity is zero, slopes
downward to a height of $60 where the quantity is 10, and then coincides with
MPB Austin
1 point: Q Austin labeled at a quantity of zero (because MSC exceeds MPB Austin
for every clinic)
1 point: Q Ally found at the intersection of MSC and MPB Ally and shown on the
horizontal axis
1 point: Q Optimal found at the intersection of MSC and MSB and shown on the
horizontal axis

module 76 Public Goods 753