#1
What is an externality in economics?
A cost or benefit that affects a party who did not choose to incur that cost or benefit
ExplanationUnintended impact on others in economic transactions.
#2
Which economic concept is closely related to the concept of externalities?
Social cost
ExplanationOverall societal costs linked to externalities.
#3
Which of the following is an example of a positive externality?
Vaccination leading to herd immunity
ExplanationBenefits to others through an action's positive outcome.
#4
Which type of externality occurs when an individual or firm's actions impose costs on others without their consent?
Negative externality
ExplanationCost imposition without others' agreement.
#5
Which of the following is an example of a negative externality?
Pollution from a factory affecting nearby residents
ExplanationUndesirable side effect harming those not involved.
#6
What is the Coase Theorem in economics related to externalities?
The concept that private parties can negotiate and solve externalities without government intervention
ExplanationPrivate negotiation to resolve externalities without state involvement.
#7
What is the difference between a positive and a negative externality?
Positive externalities benefit a third party, while negative externalities harm a third party.
ExplanationPositive benefits vs. negative harms to third parties.
#8
What is the main purpose of internalizing externalities?
To ensure that external costs and benefits are considered in decision-making
ExplanationIncorporating external impacts into decision processes.
#9
What is the role of property rights in addressing externalities?
Well-defined property rights can help internalize external costs and benefits
ExplanationClear rights aid in incorporating external impacts.
#10
How does the Pigovian tax address externalities?
By imposing taxes to internalize the external costs
ExplanationTaxing to make parties account for external impacts.
#11
In the context of externalities, what is the tragedy of the commons?
The depletion of shared resources due to individual self-interest
ExplanationShared resource exhaustion from self-interest.
#12
What is the tragedy of the anticommons?
The underuse of resources due to excessive fragmentation of property rights
ExplanationResource underutilization from property rights fragmentation.
#13
Which economic model is often used to analyze the effects of externalities?
Game theory
ExplanationGame theory explores strategic interactions with externalities.
#14
What is the Coasean solution to externalities?
Negotiation between affected parties to reach an efficient outcome
ExplanationEfficient outcomes through negotiations, a Coasean approach.