Externalities

Markets exhibiting negative externalities will

• under produce

• over produce

• be optimal

• none of the above

Markets exhibiting positive externalities will

• over produce

• under produce

• optimal

• none of the above

What is the market-based response by government to correct a market failure caused by a negative externality?

• Pigouvian sibsidy

• Quota

• Pigouvian tax

• All of the above

It is efficient to eliminate the production of a good with a negative externality.

• True

• False

According to the Coase theorem, what could prevent two parties from coming to a mutual agreement?

• High market price

• High transaction cost

• externalities

• external benefits