#1
What is a market externality?
A situation where a market fails to allocate resources efficiently
An unintended side effect of an economic activity affecting parties not directly involved
A regulation imposed by the government to correct market inefficiencies
A situation where supply and demand are perfectly balanced
#2
Which of the following is an example of a negative externality?
A beekeeper's bees pollinating nearby farms' crops
A factory emitting pollution into a river used by local communities
A government subsidy for renewable energy production
A restaurant providing discounts for senior citizens
#3
What is the concept of 'internalizing' externalities?
The process of integrating external costs and benefits into market prices
The process of isolating external factors from market transactions
The process of compensating affected parties for external costs incurred
The process of ignoring externalities in economic analysis
#4
What is the concept of 'market failure'?
A situation where the government intervenes in the market to correct inefficiencies
A situation where the market fails to allocate resources efficiently
A situation where consumers are unable to afford goods and services
A situation where there is perfect competition among firms
#5
Which of the following is an example of a positive externality?
Pollution from a factory affecting nearby residents' health
A homeowner investing in home renovations, increasing property values in the neighborhood
A company dumping waste into a river, contaminating drinking water
A firm producing harmful chemicals, leading to environmental degradation
#6
Which of the following is an example of a common property resource?
Fish in the open ocean
A patented pharmaceutical drug
A privately-owned house
A brand-new car dealership
#7
What is the Coase Theorem?
A theory stating that market externalities can always be resolved through government intervention
A theory stating that private parties can negotiate efficient solutions to externalities without government intervention
A theory suggesting that market externalities are inevitable and cannot be corrected
A theory arguing for complete government control over market transactions
#8
Which market structure is most likely to result in inefficient outcomes due to externalities?
Perfect competition
Monopoly
Monopolistic competition
Oligopoly
#9
What is the tragedy of the commons?
A situation where private property rights lead to inefficient resource allocation
A situation where individuals overexploit shared resources resulting in their depletion
A situation where government regulation ensures fair distribution of resources
A situation where market competition leads to optimal resource allocation
#10
How do Pigovian taxes or subsidies aim to address externalities?
By directly regulating the production levels of firms
By internalizing external costs or benefits through taxes or subsidies
By restricting entry into the market
By providing grants to affected parties
#11
In the presence of externalities, what happens to the market equilibrium quantity and price compared to the socially optimal quantity and price?
Market equilibrium quantity and price are higher than socially optimal quantity and price
Market equilibrium quantity and price are lower than socially optimal quantity and price
Market equilibrium quantity is higher, but price is lower than socially optimal quantity and price
Market equilibrium quantity is lower, but price is higher than socially optimal quantity and price
#12
Which of the following is NOT a method for addressing negative externalities?
Pigovian taxes
Subsidies to producers
Cap and trade systems
Command and control regulations
#13
What is the concept of Pareto efficiency in the context of externalities?
An allocation of resources where no one can be made better off without making someone else worse off
An allocation of resources where market prices reflect the true costs and benefits of production
An allocation of resources where external costs are fully internalized by producers
An allocation of resources where government subsidies offset negative externalities
#14
What is the difference between a positive externality and a public good?
Positive externalities only benefit specific individuals, while public goods benefit everyone
Public goods are always provided by the government, while positive externalities are private benefits
Positive externalities are always non-excludable, while public goods can be excluded
There is no difference; they are two terms for the same concept
#15
What is the difference between a pecuniary externality and a technological externality?
Pecuniary externalities involve changes in relative prices, while technological externalities involve changes in production methods.
Pecuniary externalities are caused by government intervention, while technological externalities are caused by market forces.
Pecuniary externalities affect consumer preferences, while technological externalities affect producer costs.
There is no difference; they both refer to the same type of externality.
#16
Which of the following is an example of a positive feedback loop in environmental economics?
Increasing deforestation leading to soil erosion
Government subsidies for renewable energy decreasing carbon emissions
Investments in clean technology reducing pollution levels
Rising sea levels causing more frequent and severe hurricanes
#17
What is the concept of 'externality trap'?
A situation where externalities are fully internalized by market participants
A situation where individuals or firms are locked into a pattern of negative externalities
A situation where external costs exceed external benefits
A situation where government regulations prevent efficient resource allocation
#18
What is the tragedy of the anticommons?
A situation where individuals overexploit shared resources resulting in their depletion
A situation where the presence of multiple property rights holders leads to underuse of resources
A situation where government intervention leads to inefficiencies in resource allocation
A situation where market competition leads to optimal resource allocation