Chapter 10 Econ Chris Barker

Refer to Figure 10-3. What is the socially optimal quantity of output in this market?

12 units

Refer to Figure 10-2. This market is characterized by

a negative externality.

Refer to Figure 10-2. If this market is currently producing at Q4, then total economic well-being would be maximized if output

decreased to Q2.

Negative externalities lead markets to produce

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

An externality is the uncompensated impact of

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

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.

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood.

Flu shots 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.

Refer to Figure 10-4. The overuse of antibiotics leads to the development of antibiotic-resistant diseases. Therefore, the market for antibiotics is shown in

Graph (b) only.

Dioxin emission that results from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they create.