ch.10 Externalities and Public Goods

_____ is important because it leads to market failure, producing _____. -Internalizing the externality; efficient outcomes -An externality; inefficient outcomes - An externality; efficient outcomes - Internalizing the externality; inefficient outcomes

An externality; inefficient outcomes

Which is NOT a part of the three-step recipe to analyze externalities? - Predict the equilibrium outcome - Figure out the outcome that is in society's best interests - Assess the type of good - Assess what externalities are involved

Assess the type of good

Public schools require students to have up-to-date vaccinations. How does this policy help with the externality problem? - It helps insurance companies identify potential clients. - It increases medication costs for each family. - It leads to excessive absences due to sickness. - It helps prevent an outbreak that can affect other students and faculty.

It helps prevent an outbreak that can affect other students and faculty.

_____ goods provided by the government are public goods, _____ are nonexcludable. - Not all; but all - Not all; and not all - All; and all - All; but not all

Not all; and not all

Which statement does NOT describe markets that involve positive externalities? - Markets yield too few positive externalities. - Positive externalities create external benefits. - Marginal private benefits understate marginal social benefits. - Positive externalities lead to overproduction.

Positive externalities lead to overproduction.

The Rational Rule for Society may be thought of as an application of the _____, when externalities are considered. - equilibrium quantity - opportunity cost principle - Rational Rule - marginal principle

Rational Rule

Which statement is NOT true about the government intervention of using corrective taxes or subsidies and cap-and-trade systems? - They are tools that the government uses to support the market. - They are worse than using regulations or government provision. - They are policies that can solve externality problems. - These programs complement market forces.

They are worse than using regulations or government provision.

Which is NOT an example of an activity with a positive externality? - You prepare before your study group meeting. - You exercise regularly to stay healthy. - You spend your spare time trolling on social media. - You work hard in order to earn a pay raise.

You spend your spare time trolling on social media.

The best way to solve the tragedy of the commons is by: - implementing government regulations. - assigning ownership rights. - allowing government provision. - utilizing a cap-and-trade program.

assigning ownership rights.

In the presence of externalities, market forces ignore the interests of _____, resulting in _____. - the government; too little tax income - bystanders; an inefficient outcome for society - consumers; underproduction - businesses; overproduction

bystanders; an inefficient outcome for society

People _____ be prevented from appreciating the beautiful exterior of St. Patrick's Cathedral in New York City, so the building is _____. - can; nonexcludable - cannot; nonexcludable - can; excludable - cannot; excludable

cannot; nonexcludable

Goods that are nonexcludable and rival are known as: - club goods. - public goods. - common resources. - private goods.

common resources.

A locked car is considered to be _____, and an airport people-mover is _____. - nonexcludable; excludable - excludable; excludable - excludable; nonexcludable - nonexcludable; non excludable

excludable; nonexcludable

When people make choices that benefit others, they create _____, which lead to a _____ quantity than the socially optimal quantity. - external benefits; larger - private benefits; larger - private benefits; smaller - external benefits; smaller

external benefits; smaller

A solution to the free-rider problem is the government's power to _____, which is something businesses and individuals _____ have the power to do. - limit production of goods to the socially optimal quantity; also - limit production of goods to the socially optimal quantity; do not - force people to pay for the goods they benefit from; also - force people to pay for the goods they benefit from; do not

force people to pay for the goods they benefit from; do not

Positive externalities create the _____ problem when people cannot be excluded from using something. - nonexcludable - free-rider - Coase Theorem - excludable

free-rider

Because the determination of the socially optimal outcome is a "how many?" question, the _____should be applied to find it. - external cost - marginal principle - external benefit - law of supply

marginal principle

The Rational Rule for Society indicates that markets should trade at a level where: - marginal social benefit = marginal social cost. - marginal social cost = marginal private cost. - marginal social benefit = marginal private benefit. - marginal external cost = marginal private cost.

marginal social benefit = marginal social cost.

Goods that are rival and also nonexcludable create a _____ externality because _____. - positive; your private benefits create external costs to others - positive; you have to pay for the ownership rights - negative; your private benefits create external costs to others - negative; you have to pay for the ownership rights

negative; your private benefits create external costs to others

Goods that are _____ and _____ are known as common resources. - nonexcludable; rival - excludable; nonrival - excludable; rival - nonexcludable; nonrival

non excludable;rival

Solutions to negative externalities should be addressed by _____, instead of _____, whenever possible. - corrective taxes; government intervention - subsidies; private bargaining - subsidies; corrective taxes - private bargaining; government intervention

private bargaining; government intervention

Excessive rules may _____ competition and _____ innovation. - increase; increase - reduce; increase - increase; reduce - reduce; reduce

reduce; reduce

A _____ good is a good for which your use of it _____. - rival; creates a free-rider problem - rival; comes at someone else's expense - nonrival; subtracts someone else's enjoyment - nonrival; does not create a free-rider problem

rival; comes at someone else's expense

Government policies that specify _____ are likely to give an incentive to businesses to solve externality problems. - the amount to be taxed - what regulations are applied to them - the intended objectives - the processes that must be used to achieve the goals

the intended objectives

The externality problem can be summed up by saying that _____ outcomes occur when people don't account for the interests of _____. - worse; bystanders - worse; participants - better; bystanders - better; participants

worse; bystanders

The socially optimal outcome is the most efficient outcome for _____. - bystanders - buyers and sellers - buyers, sellers, and bystanders - businesses and the government

buyers, sellers, and bystanders

When private bargaining is allowed to include bystanders, _____ because _____. - worse outcomes are possible; people are worse off - corrective subsidies are applied; people are better off - better outcomes are possible; externalities are considered - corrective taxes are applied; interested parties negotiate

better outcomes are possible; externalities are considered

When all interested parties are included, externalities can be removed through _____. - private bargaining - cap-and-trade programs - corrective taxes - regulations

private bargaining

Laws, rules, and regulations can be used to remove the externalities in all the following situations, EXCEPT: - the government providing an incentive for installing solar panels. - the law that makes unsolicited "spam" calls to your cell phone illegal. - school rules that require students are up-to-date on their vaccines. - laws banning smoking in public places.

the government providing an incentive for installing solar panels.