Indian Institute of Technology Madras
BS Degree Programme · Examination & Study Paper
BSMS3206 · Managerial Economics
Externalities & public goods
Examination Instructions & Guidelines
- Solve on notebook/paper first before checking solutions.
- MCQ: Exactly 1 option is correct. Negative marking applies.
- NAT: Numerical response. No negative marking.
- Scientific calculator allowed for all calculations.
- Official answer key is sealed at the end of this sheet.
End Term · 31 Aug 2025 (FN)End Term
Read the passage below, then answer Q1–Q2
A beekeeper lives adjacent to an apple orchard. The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees.
Beekeeping has a marginal cost MC=10+5Q, where Q is the number of beehives. Each hive yields $50 worth of honey.
Based on the above data, answer the given subquestions.
Q1NAT2 Marks·Write the numberWhat should be the socially efficient number of hives that the beekeeper should maintain ____________
Your answer:- Q2NAT1 Mark·Write the number
How many beehives will the beekeeper maintain if we ignore the apple orchard ____________
Your answer: - Q3MCQ1 Mark·Choose one option
Public goods are provided by the government because
- APrivate firms do not take into account the impact of external costs.
- BGovernments are more efficient than private firms at producing public goods.
- CPeople value national defence very highly.
- DPrivate firms will make an economic profit.
- Efree-rider problems result in underproduction by private markets.
- Q4MCQ1 Mark·Choose one option
Which goods represent network goods?
- APepsi, toilet paper, headphones
- Bcalculator, oven, couch
- CTwitter, Microsoft Excel, Facebook
- Dfireworks, lighthouse, swimming pool
End Term · 31 Aug 2025 (AN)End Term
Read the passage below, then answer Q5–Q6
Based on the above data, answer the given subquestions.
Q5NAT2 Marks·Write the numberWhat should be the socially efficient number of hives that the beekeeper should maintain ____________
Your answer:- Q6NAT1 Mark·Write the number
How many beehives will the beekeeper maintain if we ignore the apple orchard ____________
Your answer: