Externalities

Externalities

University

15 Qs

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Externalities

Externalities

Assessment

Quiz

Social Studies

University

Medium

Created by

Doug Bice

Used 19+ times

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15 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

When consumption of a good generates a positive externality, which of the following is likely to be true at the free market equilibrium? 

Marginal social benefit is less than marginal private cost. 
Marginal social benefit is greater than marginal private benefit. 
Marginal social cost is greater than marginal social benefit. 
Marginal social cost is less than marginal private benefit. 

2.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

If the production of a good generates a negative externality, which of the following is likely to be true at the free market equilibrium? 

The market equilibrium quantity is equal to the socially optimal quantity. 

The marginal private cost is greater than the marginal social cost. 
The price of the product equals the marginal social cost. 

The market equilibrium quantity is greater than the socially optimal quantity. 

3.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

If the production of a good generates a positive externality, the government can increase allocative efficiency by: 

taxing the producer of the good
setting a price ceiling to encourage production of the good
subsidizing the producer of the good 
prosecuting firms that produce the good without proper permits

4.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Which of the following best represents a positive externality? 

Purchasing a pass for an amusement park 
Being disturbed by neighboring construction noise 
Dumping waste on someone else’ s property 
Enjoying watching birds at a neighbor’s bird feeder 

5.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Which of the following is true when there are negative externalities associated with the production of a good? 

The market will adjust automatically to equate marginal social costs and marginal social benefits. 
Marginal social costs will exceed marginal private costs unless businesses are forced to internalize the external costs. 
Marginal private costs will exceed marginal social costs, but the government can correct the problem. 
Producers should be subsidized so that they will produce more of the good. 

6.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

The difference between what consumers are willing to pay for units of a good and the price consumers actually pay for units of the good is called:

a positive externality 
marginal utility
consumer surplus 
producer surplus

7.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

If the production of good X creates a positive externality, then from society’s perspective, the industry that produces good X tends to produce:

less than the socially optimal amount of good X 
greater than the socially optimal amount of good X 
the socially optimal amount of good X 
a shortage of good X, unless taxed 

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