Negative Externalities + Policies

What are negative externalities in consumption?

• Costs borne by the consumer of a good/service

• Costs borne by the government due to consumption of a good/service

• Costs borne by third parties due to consumption of a good/service

• Costs borne by the producer of a good/service

What is the socially optimal equilibrium in consumption/production?

• Where MPB = MSB

• Where MSC = MSB

• Where MPC = MPB

• Where MPC = MSC

What is the purpose of tradeable permits in addressing negative externalities generated during production?

• To increase pollution levels

• To regulate pollution levels

• To reduce pollution levels

• To ignore pollution levels

What is the effect of imposing a per-unit tax on producers?

• Increases MPC

• Decreases MPC

• Increases MPB

• Decreases MPB

What is the role of legislation in addressing negative externalities?

• To regulate external costs

• To ignore external costs

• To increase external costs

• To reduce external costs

What is the purpose of a consumption quota?

• To increase the amount of goods consumed

• To increase the amount of goods produced

• To limit the amount of goods produced

• To limit the amount of goods consumed

What is the impact of sunk cost fallacy on taxation effectiveness?

• Increases effectiveness

• Decreases effectiveness

• No impact

• Unpredictable impact

What is the impact of loss aversion on taxation effectiveness?

• Increases effectiveness

• Decreases effectiveness

• No impact

• Unpredictable impact

What is the main purpose of indirect taxes in correcting market failure?

• To regulate consumption/ production

• To ignore consumption/production

• To decrease consumption/production

• To increase consumption/production

What is the consequence of over-production in negative externalities?

• Under-allocation of resources

• Welfare loss

• Allocative efficiency

• Social welfare increase