WorksheetsNEGATIVE EXTERNALITIES
Total questions: 12
Worksheet time: 12mins
If the production of a good generates a negative externality, which of the following is true at the private market equilibrium?
The private 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 private market equilibrium quantity is greater than the socially optimal quantity.
Refer to the image. Given the position of the marginal social cost curve, one can conclude that
production of good X creates a negative externality.
private cost of producing good X exceeds the social cost of production at all levels of output.
market quantity, Q3, is the socially optimal quantity.
free market will produce too little of good X.
Markets exhibiting negative externalities will
under produce.
over produce.
be optimal.
Driving a car on crowded highway produces
a negative externality.
a positive externality.
Apartment dwellers who buy fire alarms or fire extinguishers generate a
negative externality.
positive externality.
The market should produce the quantity where
marginal social cost equals marginal social benefit.
marginal private cost equals marginal social benefit.
external cost equals external benefit.
private cost is greater than social cost.
Marginal Social Cost minus Marginal Private Cost equals
internal cost.
external cost.
marginal cost.
marginal revenue.
A negative externality results due to firms
being very, very , bad.
not paying the full cost of production.
firms internalizing production costs.
firms not realizing they are polluting.
The shaded triangle on the diagram shows
the DWL of overproduction.
the impact of a positive externality.
the DWL of underproduction.
consumer surplus.
Which of the following statements are true?
Area J represents the DWL of overproduction.
Area F shows total surplus being maximised at equlilbrium.
Area H shows DWL of underproduction if Q2 is produced.
Area M shows producer surplus.
