#1
Which of the following is an example of a negative externality?
A beekeeper who produces honey.
A factory polluting a nearby river.
A farmer who grows organic vegetables.
A company offering free vaccinations to its employees.
#2
Which of the following is an example of a positive externality?
A factory emitting pollutants into the air.
A neighborhood installing security cameras.
A person receiving vaccinations and contributing to herd immunity.
A restaurant offering discounts during off-peak hours.
#3
Which of the following is a solution to address negative externalities?
Taxation or regulation to internalize the externality.
Subsidizing the production of goods with negative externalities.
Ignoring the negative externalities to maintain market efficiency.
Increasing consumer demand for goods with negative externalities.
#4
How does a negative externality affect the quantity and price of a good in the market?
It increases quantity and lowers price.
It decreases quantity and raises price.
It decreases quantity and lowers price.
It increases quantity and raises price.
#5
What is the concept of 'social cost' in the context of externalities?
The cost incurred by society to produce a good or service.
The total cost of producing a good or service, including external costs.
The cost of producing a good or service, excluding external costs.
The cost borne by individuals directly involved in production.
#6
Which of the following best defines an externality in economics?
A cost or benefit that affects a party who did not choose to incur that cost or benefit.
A cost or benefit that affects only the producer of a good.
A cost or benefit that affects the government's budget.
A cost or benefit that is only relevant in a closed economic system.
#7
How does a positive externality affect the market?
It shifts the demand curve to the left.
It shifts the supply curve to the right.
It shifts the demand curve to the right.
It shifts the supply curve to the left.
#8
What is the difference between a positive externality and a negative externality?
Positive externalities benefit third parties, while negative externalities harm them.
Positive externalities only affect producers, while negative externalities only affect consumers.
Positive externalities result in lower prices, while negative externalities result in higher prices.
Positive externalities occur in perfectly competitive markets, while negative externalities occur in monopolistic markets.
#9
In the context of externalities, what is a public good?
A good that is produced only by the government.
A good that is both non-excludable and non-rivalrous in consumption.
A good that is rivalrous in consumption but excludable.
A good that generates negative externalities.
#10
What is an example of a consumption externality?
A factory polluting a river.
A neighbor playing loud music late at night.
A person smoking in a public area.
A company investing in renewable energy sources.
#11
Which of the following statements best describes a market failure?
When prices in the market are determined by supply and demand.
When resources are allocated efficiently in the market.
When the market fails to allocate resources efficiently due to externalities.
When government intervention is minimal in the market.
#12
What is the Coase theorem?
It states that market failures are unavoidable due to externalities.
It suggests that with well-defined property rights and zero transaction costs, parties can bargain to solve externality problems.
It argues that externalities can only be addressed through government intervention.
It proposes that externalities are not significant in market economies.
#13
What is the tragedy of the commons?
A situation where individuals overuse or deplete a shared resource.
A situation where government intervention prevents externalities from occurring.
A situation where individuals conserve resources for future generations.
A situation where externalities only affect a single individual.
#14
What is the difference between a pecuniary externality and a technological externality?
Pecuniary externalities involve monetary transactions, while technological externalities involve technological innovations.
Pecuniary externalities occur in perfect competition, while technological externalities occur in monopolistic competition.
Pecuniary externalities affect market prices, while technological externalities affect production processes.
Pecuniary externalities are positive, while technological externalities are negative.
#15
What is the tragedy of the anticommons?
A situation where individuals underuse a shared resource.
A situation where too many individuals have the right to exclude others from a resource.
A situation where government intervention leads to market inefficiencies.
A situation where individuals overuse a resource due to lack of property rights.
#16
What is the key difference between internalizing an externality through Pigouvian taxation and through the Coase theorem?
Pigouvian taxation requires government intervention, while the Coase theorem relies on private negotiation.
Pigouvian taxation only applies to positive externalities, while the Coase theorem only applies to negative externalities.
Pigouvian taxation is based on marginal social cost, while the Coase theorem is based on marginal private cost.
Pigouvian taxation increases transaction costs, while the Coase theorem decreases transaction costs.
#17
What is the difference between a positional externality and a technological externality?
Positional externalities are related to the location of economic activities, while technological externalities are related to advancements in production techniques.
Positional externalities involve changes in relative positions in society, while technological externalities involve changes in production costs.
Positional externalities are positive, while technological externalities are negative.
Positional externalities affect market prices, while technological externalities affect consumer behavior.