Ch 10-

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Covid-19 vaccines provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

At the current output level, the marginal social benefit exceeds the marginal private benefit.

Education yields positive externalities. For example,

a more educated population tends to result in lower crime rates.

If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should

encourage the production of computer chips with subsidies.

Negative externalities lead markets to produce

greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.

When an externality is present, the market equilibrium is

inefficient, and the equilibrium does not maximize the total benefit to society as a whole.

An externality is the uncompensated impact of

one person's actions on the well-being of a bystander.

According to the Coase theorem, private parties can solve the problem of externalities if

property rights are clearly defined.

When positive externalities are present in a market

social benefits will be greater than private benefits.

If a sawmill creates too much noise for local residents,

the government can raise economic well-being through noise-control regulations.

In some cases, tradable pollution permits may be better than a corrective tax because

the government can set a maximum level of pollution using permits.


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