WorksheetsMarket Failures and Externalities
Total questions: 16
Worksheet time: 8mins
In which of the following situations is market failure least likely to occur? A situation where;
externalities exist
many producers compete in the market
there is a sole producer in market
there is a very uneven distribution of income and wealth
Which of the following statements is true about externalities?
When externalities exist, resources are allocated efficiently
When positive externalities exist, efficiency is improved by taxing the product
From society's point of view, the output of goods for which a positive externality exists is too low
The price system overproduces goods with positive externalities
When social costs are greater than private costs, there is a;
positive externality
negative externality
less than socially optimal output
socially optimal output
A tin-mining company is found guilty of polluting a river. Which one of the following government measures would an economist describe as an appropriate market-based solution?
Imposition of regulations and direct control on the company
A reduction of private property rights over the river
Increase tax on the tin produced
Nationalization of the tin-mining company
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.
A tax equal to the external cost on firms that emit pollutants would
not reduce pollution levels at all.
provide firms with the incentive to increase the level of activity creating the pollution.
provide firms with the incentive to decrease the level of activity creating the pollution.
provide firms with little incentive to search for less environmentally damaging production methods.
Which of the following is an example of a positive externality resulting from an outdoor band concert?
An elderly woman in her apartment hears a song that she liked as a child.
A pair of endangered birds leave their nest in a nearby tree when the concert starts.
A pizza parlor closes early, because all of its customers are at the concert.
A traffic jam occurs as drivers hunt for parking spots near the concert.
An Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
Public good
Free rider
Externalities
Private sector
Who tries to prevent market failures due to negative externalities?
The FBI
Merchant Marines
The Government
Porch Pirates
Going to the gym and seeing results, is a form of _______ externalities.
positive
negative
_____ are situations when there's an external costs or external benefits that accrue to other people or society as a whole.
Externalities
Internalities
Progressives
Education is a negative externality.
False
True
Regulatory policies are rules established by _____ decree.
government
social
private
market
“Side effects” of producing the good or service and can have a positive or negative affect on others.
Externalities
Public Goods
Free-rider problem
