Externatlities

What is often the main goal of advertisers?

• To provide detailed product information

• To increase sales and market share

• To educate the public on environmental issues

• To support non-profit organizations

What is an example of a negative externality?

• A city putting on a Fourth of July fireworks show

• A neighbor's bees pollinating your flowers

• A factory dumping chemical waste into a river

• Developing a less polluting car

What is a positive externality?

• A cost that falls on someone other than the producer or consumer

• A benefit that falls on someone other than the producer or consumer

• A private benefit from selling a product

• A cost paid by the producer

Why do goods that generate negative externalities tend to be overproduced?

• They are subsidized by the government

• They are under high demand

• Their full cost is not reflected in the market price

• Their full cost is reflected in the market price

What is the free-rider problem?

• When a product is overpriced due to its brand

• When external costs are paid by the producer

• When people benefit from a good without paying for it

• When a company monopolizes a market

Why are some monopolies legal?

• Because they ensure price stability

• Because they prevent negative externalities

• Because they serve the public interest

• Because they encourage perfect competition

What is a technology spillover?

• A negative externality from using technology

• A government subsidy for technology companies

• A benefit from technical knowledge spreading and promoting further innovations

• A cost that falls on technology companies

A college education is a good example of a positive externality. Why?

• A college education only benefits the individual receiving it.
• A college education has no impact on society.
• A college education creates more problems for society.
• A college education creates benefits for society as a whole with a more productive workforce.