#1
Which of the following best defines market forces?
Forces of supply and demand influencing prices and allocation of resources
ExplanationInfluences on prices and resource allocation by supply and demand dynamics.
#2
What is an externality in economics?
A situation where the production of a good affects others who are not involved in the transaction
ExplanationWhen the production of a good impacts individuals not part of the transaction.
#3
Which of the following is an example of a negative externality?
A factory emitting pollution into the air, affecting nearby residents' health
ExplanationPollution from a factory harming the health of nearby residents.
#4
What is the Coase theorem?
A theory suggesting that private parties can resolve externalities through bargaining, regardless of who holds property rights
ExplanationPrivate parties can solve externalities through bargaining, regardless of property rights.
#5
What is the tragedy of the commons?
A situation where individuals overuse and deplete a shared resource
ExplanationOveruse and depletion of a shared resource by individuals.
#6
Which of the following is an example of a positive externality?
An individual receiving a flu vaccination
ExplanationFlu vaccination benefiting others beyond the recipient.