Externalities and markets

A spillover or side effect of production or consumption

• Monopoly

• Oligopoly

• Externality

• Market effect

Which of the following is the best definition of a positive externality?

• benefits enjoyed by both consumers and producers in the market for a good.

• benefits enjoyed by only consumers in the market for a good.

• benefits enjoyed by only producers in the market for a good.

• benefits enjoyed by bystanders outside the market transactions of a good

Which of the following is the best definition of a negative externality?

• Negative effects on both consumers and producers in the market of a good.

• Negative effects on bystanders outside of a market from consumer and producer transactions.

• Negative effects on just consumers in the market for a good.

• Negative effects on just producers in the market for a good.

Which of the following is the best definition of a bystander:

• A consumer

• A producer

• Both producers and consumers

• Someone not involved in the market but affected by market activity

Which of the following is the best option for fixing a negative externality?

• Tax the production of the good.

• The government can set a limit/quota on the number of units of a good that is produced

• Subsidize the production of the good.

• The government can provide the good for free.

Which economic goal does this exchange at an outdoor food stand BEST represent?

• economic stability

• economic freedom

• economic equity

• economic security

What is one reason that firefighter services are considered a public good?

• Everyone in the community benefits from it.

• Nobody in the community has to pay for it.

• Private firms make a profit from producing it

• Individual citizens pay directly for it.

Which of the following is an example of a negative externality resulting from an outdoor concert in the park?

• College students near by get to enjoy free entertainment

• An elderly woman in her apartment hears a song that she liked as a child.

• A pizza parlor stays open later and makes a bigger profit than most nights

• A traffic jam occurs as drivers hunt for parking spots near the concert.

Which of the following explains why a city fireworks display on the Fourth of July is provided as a public good?

• Fireworks displays usually take place in a public area.

• Fireworks are a scarce resource.

• Nonpayers cannot be prevented from seeing the fireworks.

• Each consumer pays a fee to see the fireworks.

If a student volunteers at a food pantry on Fridays after school, which of the following might be a negative externality?

• The student might learn a new skill.

• The student might make some new friends.

• The student's parents have to drive him or her to the food pantry.

• The student might decide to volunteer two days a week.