6. People sometimes argue that imports should be limited by government policy. Suppose a government quota on the quantity of imports causes net exports to rise. Explain why total expenditures and national output may rise after the quota is imposed. Who is
likely to benefit from the quota? Who will be hurt?

7. Suppose the Herfindahl index for domestic production of televisions is 5,000. Does this imply a very competitive or a noncompetitive environment?

14. Go to http://www.heritage.org and find the Economic Freedom map. Use the map to determine the most economically free continent and the least economically free continent. Then do a search to find out the real GDP per capita of people in representative
countries of those continents.

3. Use the accompanying table to answer the following questions.
Quantity
Private Social
Cost Cost Benefit
1 $ 2 $ 4 $12
2 $ 6 $ 10 $22
3 $ 12 $ 18 $30
4 $ 20 $ 28 $36
5 $ 30 $ 40 $40
a. What is the external cost per unit of output?
b. What level of output will be produced?
c. What level of output should be produced to
achieve economic efficiency?
d. What is the value to society of correcting the
externality?

4. What level of tax would be appropriate to internalize the externality in exercise 3?

8. Suppose the following table describes the marginal costs and marginal benefits of waste (garbage) reduction. What is the optimal amount of garbage? What is the situation if no garbage is allowed to be produced?

Percentage Marginal Costs Marginal Benefits Of Waste (millions of dollars) (millions of dollars) Eliminated
10% 10 1,000
20% 15 500
30% 25 100
40% 40 50
50% 70 20
60% 110 5
70% 200 3
80% 500 2
90% 900 1
100% 2,000 0