Practice Questions
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Which of the following best describes a negative externality?
A negative externality is a cost that harms people who are not directly involved in an activity. Other options are incorrect because This option sugge...
Which of the following is an example of government intervention to promote positive externalities?
When the government gives money for education, it helps everyone learn more. Other options are incorrect because Some might think that taxing pollutio...
How can taxation be used to address social costs associated with negative externalities?
Taxing goods that cause harm makes them more expensive. Other options are incorrect because Some think giving money to producers helps; Reducing incom...
How can the government effectively internalize the externalities associated with pollution while considering the impact on public goods?
Imposing taxes on pollution makes companies pay for the harm they cause. Other options are incorrect because Some might think giving money to companie...
How can subsidies be used to mitigate negative externalities, considering the Coase theorem's implications on environmental impact?
Subsidies can help support businesses that create good things for society. Other options are incorrect because Some might think that raising costs for...
Which of the following best describes a negative externality?
A negative externality is a cost that affects people who are not directly involved in an activity. Other options are incorrect because This option con...
Which of the following is an example of a positive externality?
When your neighbor has a beautiful garden, it makes your area look nicer. Other options are incorrect because Some might think pollution helps busines...
Which of the following is an example of a negative externality?
Pollution from a factory is a negative externality. Other options are incorrect because A new park can raise property values, which is a positive effe...
A city is considering building a new factory that will produce bicycles. While it promises to create jobs and boost the local economy, nearby residents are concerned about potential air pollution and increased traffic. Which of the following best describes the externalities involved in this situation?
The factory creates jobs, which helps the economy. Other options are incorrect because This answer suggests that the job creation is good enough to ig...
In the context of externalities, when the production of a good creates a negative impact on third parties, such as pollution, this is referred to as a _____ externality.
A negative externality happens when someone else's actions hurt others. Other options are incorrect because A positive externality helps others; A dir...
Which of the following statements accurately describe externalities?
Externalities can be both positive and negative. Other options are incorrect because Some think externalities are only bad, like pollution; This optio...
A factory produces widgets and emits pollution as a byproduct of its production process. Which classification best describes the pollution generated, and why is it categorized this way?
The pollution is a negative externality. Other options are incorrect because Some might think pollution helps the factory earn more money; This choice...
Arrange the following steps to analyze the impact of a negative externality, such as pollution, on market efficiency: A) Identify the external cost imposed on third parties B) Assess the market equilibrium without external costs C) Propose policy interventions to correct the market failure D) Re-evaluate the new equilibrium after interventions
First, we need to see how pollution affects people who are not involved in the market. Other options are incorrect because This option suggests starti...
If a factory emits pollution that affects the health of nearby residents, which of the following is the underlying cause of this negative externality?
The factory's production process creates harmful emissions. Other options are incorrect because Some might think that residents not paying for the fac...
How can the presence of a negative externality, such as pollution, affect market outcomes and efficiency?
When pollution happens, companies often make more products without thinking about the harm they cause. Other options are incorrect because Some might ...
Positive externalities are to education as negative externalities are to what?
Pollution is a negative externality. Other options are incorrect because Public transport usually helps people get around; New technology often brings...
If a factory's pollution affects the health of nearby residents, which type of externality is this an example of?
This is a negative externality because the factory's pollution harms the health of people nearby. Other options are incorrect because A positive exter...
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