FEE Externalities

Actions individuals and businesses take that impose spillover costs on others.

• negative externality

• positive externality

Individuals and businesses do too much of these activities because they may not weigh the costs to others.

• negative externality

• positive externality

Which of the following is an example of a negative externality?

• education

• pollution

• home remodeling

Actions individuals and businesses take that provide spillover benefits to others.

• negative externality

• positive externality

Individuals and businesses don’t do enough of these activities because they may not weigh the benefits to others.

• negative externality

• positive externality

Without any intervention in a market with a positive externality, consumption is

• less than the socially optimal quantity

• the same as the socially optimal quantity

• more than the socially optimal quantity

Which of the following is an example of a positive externality?

• A neighbor who buys a birdfeeder and others enjoy having the birds around.

• A neighbor playing loud music as others are trying to relax on their patio.

• A neighbor who has a barking dog that wakes people up early.

If you want less of something you:

• Tax it

• Subsidize it

What is an attempt to internalize a negative externality into the original market transaction?

• Taxes

• Subsidies

What attempts to give the consumer a benefit roughly equal to the social benefit?

• Tax

• Subsidy