WorksheetsExternalities
Total questions: 10
Worksheet time: 8mins
Which of the following statements best describes market failure?
Resource allocation that does not maximise welfare in society
Widening income inequality
Resources are not being used efficiently in society
Demand does not equal supply in a market
Which of the following statements is not true about negative externalities?
Society can experience a welfare loss because of them
Pollution from a factory often causes negative externalities
They result in an under-allocation of resources
MSC is greater than MSB at the market output
Which of the following goods or services is the most likely to lead to negative externalities of consumption?
Mobile phones
Solar panels
An art gallery
Organic vegetables
In the diagram, which of the following is not true?
Arrow A is the external cost
The consumer and producer surplus are not maximised at point C
Point D is the socially efficient output
Supply equals marginal private cost at B
What is the best description of the welfare loss associated with a negative externality? It is the:
Range of output where MSC < MSB
Point where MPC = MPB
Range of output where MSC > MSB
Point where MSB = MSC
Which of the following goods and services is the least likely to be associated with significant consumption positive externalities?
Measles vaccine
New primary school
Cinema
Hospital
Which of the following is untrue in the diagram?
There is an under allocation of resources
It shows negative consumption externalities
The consumer and producer surplus are maximised at output Q
The welfare loss is the yellow triangle
The diagram shows the market for a good.
External cost
Producer surplus
External benefit
Consumer surplus
The external benefits of healthcare affect third party individuals outside those people who directly benefit from the healthcare they consume. This means the:
Marginal social benefit is greater than marginal private benefit
Marginal social cost equals marginal social benefit
There are no negative externalities of consumption
The market for healthcare is at the socially efficient level
The data shows the forecasted costs and benefits of building a new bridge:
Private costs $150m
External costs $40m
Private benefits $130m
External benefit $20m
From the data, it can be concluded that:
Social benefits are greater than the social costs
Social costs are greater than the social benefits
Society would be better off if the bridge was built
Social benefit equal $20m
