Economic Externalities and Market Failures Quiz

Negative externality imposes costs on third parties due to economic activities.

Common pool resources, like fisheries, are shared and subject to overuse.

Pigovian tax is named after a famous economist and is used to address negative externalities.

Economic externality involves the impact on a third party by the production or consumption of a good or service.

Immunization is a positive externality as it benefits the community by reducing disease spread.

A public good is non-rivalrous and non-excludable, benefiting everyone in society.

Market failure occurs when the market doesn't allocate resources efficiently.

Tragedy of the commons is overuse of shared resources due to self-interest, leading to depletion.

Taxation is a government tool to address negative externalities by internalizing costs.

The Coase Theorem explains how markets can manage externalities efficiently through negotiation.

Positive externalities impact third parties, while public goods benefit everyone in society.

Tragedy of the anticommons: underuse of resources due to excessive ownership rights.

Internalizing externalities involves individuals bearing the costs or enjoying the benefits of their actions.

Monopolies are prone to inefficient resource allocation due to externalities.

Pigovian subsidy aims to promote the production of goods with positive externalities.