1. Its marginal social benefit is higher than its marginal social cost.

2. Its marginal social cost is lower than its marginal private benefit.

3. Its marginal private benefit is higher than its marginal social benefit.

4. Its marginal social cost is lower than its marginal social benefit.

5. None of the above

45)The graph above illustrates the market equilibrium production of a good associated with an externality, and the social cost of this externality. According to the graph, if the government wanted to achieve the socially optimal level of this good’s production, it could:

1. Tax the producers.

2. Subsidize the producers.

3. Tax the consumers.

4. Introduce a price ceiling.

5. More than one measure will achieve the socially optimal level of production.

Price	$50	$100	$150	$200	$250
Quantity supplied	1	2	3	4	5
Quantity demanded (Peter)	5	4	3	2	1
Quantity demanded (John)	4	3	2	1	0

46)The table above defines the supply of an indivisible public good, and two individual demand schedules for it. According to the table, in a free market equilibrium:

1. Peter will buy 3 units of the public good, John won’t finance it.

2. Peter will buy 3 units of the public good, John will buy 1.

3. Peter will buy 2 units of public good, John will buy 1.

4. Peter and John will each buy 2 units of the public good.

5. None of the above.