Externalities and Government Intervention

Externalities and Government Intervention

Assessment

Interactive Video

Business, Social Studies, Economics

9th - 12th Grade

Hard

Created by

Patricia Brown

FREE Resource

The video tutorial by Paul Hanley discusses externalities, which are the costs or benefits of a decision on a bystander not considered by the decision-maker. Negative externalities, like pollution from a factory, lead to overproduction, while positive externalities, such as education, result in underproduction. The government can intervene through taxes, subsidies, or regulations to address these issues.

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10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is an externality?

A decision that only affects the decision-maker

A private agreement between two parties

A cost or benefit affecting a bystander not considered by the decision-maker

A government policy to regulate markets

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the example of a polluting factory, what is the social cost?

The cost of production for the factory

The cost of pollution to the factory

The cost of raw materials

The extra cost to individuals affected by pollution

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What happens when there is a negative externality?

Production stops completely

No change in production

Overproduction occurs

Underproduction occurs

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the result of not having property rights in the context of externalities?

No impact on production

Underproduction of negative externalities

Overproduction of negative externalities

Efficient market outcomes

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a positive externality?

A cost that affects a bystander

A benefit that only affects the decision-maker

A benefit affecting a bystander not considered by the decision-maker

A benefit that affects a bystander and is considered by the decision-maker

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Why is education considered a positive externality?

It benefits both the individual and the economy

It is overproduced

It has no social benefits

It only benefits the individual

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the private benefit of education?

Decreased economic growth

Lower social benefits

Increased pollution

Higher income and better job prospects

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