Negative/Positive Externalities

What was the consequence of the paper factory's pollution on the lake's ecosystem?

• Increased fish population

• More sunlight

• Cleaner water

• A lot of fish dying

How did the local government respond to the fishermen's protests?

• By ignoring them

• By closing the hotel

• By installing filters in the factory

• By announcing a new law for waste management

What was a positive externality mentioned in the text?

• The smell of freshly roasted coffee

• The paper factory's pollution

• The hotel blocking sunlight

• Trash on the beach

What economic concept is illustrated when the paper factory does not include the cost of environmental damage in its production costs?

• Negative externalities

• Tragedy of the commons

• Private costs

• Supply and demand equilibrium

What happens to the price and demand of paper when the factory is forced to internalize the costs of pollution?

• Price increases, demand decreases

• Price decreases, demand increases

• Price and demand both increase

• Price and demand both decrease

What is the 'tragedy of the commons' as mentioned in the text?

• When everyone takes as much as they can from a resource that belongs to no one

• When fishermen can't sell fish

• When a hotel blocks sunlight from a lake

• When a paper factory pollutes a river

What are the ways to combat negative externalities mentioned in the text?

• Ignoring the problem

• Closing factories, banning fishing, and stopping hotel construction

• Only through government intervention

• Public awareness, assigning property rights, internalization, regulation and fines

How does assigning property rights help in combating negative externalities, as mentioned in the text?

• It increases the number of public protests

• It makes no difference in addressing externalities

• It allows for direct regulation of resources

• It encourages responsible use and management of resources

How do positive externalities affect the supply curve in a market?

• It shifts the supply curve to the left

• It shifts the supply curve to the right

• It does not affect the supply curve

• It makes the supply curve steeper

What role do subsidies play in correcting market failures caused by externalities?

• They penalize producers for negative externalities

• They have no effect on market failures

• They encourage consumption of goods with positive externalities

• They increase the cost of goods with negative externalities