#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 of the following is an example of a negative externality?
A factory emitting pollution into the air
ExplanationHarmful side effects imposed on unrelated third parties.
#3
What is the Coase theorem?
A theory stating that markets will naturally correct for externalities through bargaining and negotiation
ExplanationMarkets self-correct externalities via negotiation.
#4
Which policy instrument is often used to address negative externalities?
Taxes
ExplanationImposing levies to discourage harmful external effects.
#5
What is the tragedy of the commons?
A situation where individuals overuse or deplete a shared resource
ExplanationOverexploitation of communal resources.
#6
Which of the following is a characteristic of public goods?
Non-excludability
ExplanationInability to exclude individuals from benefiting.
#7
What is the free-rider problem?
A situation where individuals benefit from a public good without contributing to its provision
ExplanationBenefiting without paying for public goods.
#8
What is an example of a positive externality?
A person getting vaccinated against a contagious disease
ExplanationBeneficial side effects benefiting unrelated parties.
#9
What is an example of a club good?
Cable television
ExplanationExclusive access with membership.
#10
Which of the following is NOT a type of market failure?
Perfect competition
ExplanationAn ideal market scenario without failure.
#11
What is the Tragedy of the Anticommons?
A situation where property rights are so fragmented that valuable resources are underused.
ExplanationUnderuse due to fragmented property rights.
#12
What is the concept of Pareto efficiency?
A condition where no one can be made better off without making someone else worse off.
ExplanationOptimal state without harming others.