WorksheetsAP Micro Externalities
Total questions: 15
Worksheet time: 15mins
When social costs are greater than private costs, there is a;
positive externality
negative externality
less than socially optimal output
socially optimal output
In a market for a product with positive externalities;
all benefits are not internalized
there is too much production
profits are too low
profits are too high
__________ goods are goods that are considered __________ for consumers but which are_________ by the market. One important reason for overprovision is that the good may have __________ consumption externalities, thus the market ________ resources in its production.
Excise; desirable; underproduced; positive; overallocates
Demerit; desirable; underproduced; positive; underallocates
Normal; needs; undervalued, elastic; frees
Demerit; undesirable; overproduced; negative; overallocates
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
What class are you in?
Gym
Lunch
English
AP Microeconomics
Which of the following is an example of a negative externality resulting from an outdoor concert in the park?
College students near by get to enjoy free entertainment
An elderly woman in her apartment hears a song that she liked as a child.
A pizza parlor stays open later and makes a bigger profit than most nights
A traffic jam occurs as drivers hunt for parking spots near the concert.
If a student volunteers at a food pantry on Fridays after school, which of the following might be a negative externality?
The student might learn a new skill.
The student might make some new friends.
The student's parents have to drive him or her to the food pantry.
The student might decide to volunteer two days a week.
Industrialized nations often produce negative externalities in the form of pollution. What is a possible solution to fix this negative externality?
A tax on consumers
A government subsidy for consumers
A government subsidy for producers
A tax on producers
A positive externality will exist when
all consumers receive an equal share of economic resources
spillover costs are given to others not directly involved in the consumption or production of a good or service
the production of a good or service creates a spillover benefit
when members of a community pay for a good or service while others do not yet benefit
When a factory emits pollution into the air, which of the following is most likely to occur?
A) A positive externality
B) A negative externality
C) A neutral externality
D) No externality
Which of the following is an example of a positive externality?
A) A neighbor's loud music
B) A beekeeper's bees pollinating nearby crops
C) Traffic congestion
D) Industrial waste in a river
What is the primary reason governments intervene in markets with externalities?
A) To increase profits for businesses
B) To achieve a socially optimal level of production and consumption
C) To eliminate all externalities
D) To reduce taxes
Which policy tool is commonly used to address negative externalities?
A) Subsidies
B) Taxes
C) Price controls
D) Quotas
In the context of externalities, what does the term 'internalizing the externality' mean?
A) Ignoring the externality
B) Making the externality a part of the decision-making process
C) Eliminating the externality
D) Transferring the externality to another party
Which of the following scenarios best illustrates a market failure due to externalities?
A) A competitive market with no government intervention
B) A monopoly setting prices above marginal cost
C) A factory polluting a river without facing any costs
D) A perfectly elastic demand curve
