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Externalities: Social Benefits and Social Costs quiz #1

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  • What is an example of a negative externality?
    Pollution from a factory affecting nearby residents is an example of a negative externality.
  • What is an externality?
    An externality is a cost or benefit imposed on bystanders who are not directly involved in a market transaction.
  • What is an example of a positive externality?
    Vaccinations that reduce the spread of disease in a community are an example of a positive externality.
  • Which would be a negative externality of increased satellite usage worldwide?
    Increased space debris, which can threaten other satellites and space missions, is a negative externality.
  • What is the main economic difference between a tariff and a quota?
    A tariff is a tax on imports, while a quota is a limit on the quantity of imports allowed.
  • Which of these outcomes are possible negative externalities? Check all that apply.
    Possible negative externalities include pollution, noise, and congestion.
  • What could lead to a positive externality on the international scale?
    International cooperation on disease control can lead to positive externalities by improving global health.
  • What is an example of an external cost?
    The health problems suffered by residents due to air pollution from a factory are an external cost.
  • What are the likely economic effects of deflation?
    Deflation can lead to decreased consumer spending and increased unemployment.
  • What results in a positive externality related to societal productivity?
    Education results in a positive externality by increasing societal productivity.
  • When do demand-side market failures occur?
    Demand-side market failures occur when the market does not account for all social benefits, such as with positive externalities.
  • Which statement defines externality?
    An externality is a cost or benefit that affects people not directly involved in a transaction.
  • What market condition can the presence of network effects predispose an industry toward?
    Network effects can predispose an industry toward monopoly or market dominance.
  • In the absence of externalities, what happens in a market?
    In the absence of externalities, the market equilibrium is efficient and reflects all costs and benefits.
  • Which of these is not an advantage of secondary data?
    Secondary data may not be specific to the current research question, which is not an advantage.
  • Which of these activities will most likely result in an external benefit?
    Getting vaccinated will most likely result in an external benefit by reducing disease spread.
  • What is an example illustrating the concept of a negative externality?
    A factory dumping chemicals into a lake, harming nearby residents, illustrates a negative externality.
  • What is an example of crowding out in economics?
    Government spending that reduces private investment is an example of crowding out.
  • What is an example of a negative externality?
    Noise from a loud dog disturbing neighbors is a negative externality.
  • What is an example of a positive externality?
    Early childhood education that benefits society is a positive externality.
  • Which activity is most likely to produce an externality?
    Driving a car can produce externalities such as air pollution.
  • What mitigation tactic can reduce economic risk from negative externalities?
    Implementing regulations to limit pollution can reduce economic risk from negative externalities.
  • Which of these activities will most likely impose an external cost?
    Operating a factory that emits pollution will most likely impose an external cost.
  • What is a disadvantage of globalization?
    Globalization can lead to negative externalities such as environmental degradation.
  • What is an example of an externality?
    A neighbor's loud music affecting your sleep is an example of an externality.
  • What does an import quota do?
    An import quota restricts the quantity of a good that can be imported.
  • What does an optimal tax on pollution achieve?
    An optimal tax on pollution would internalize the external cost and reduce overproduction.
  • What type of changes do not result in a permanent difference?
    Temporary changes in market conditions do not result in a permanent difference.
  • What happens when the prices of complements or substitutes for a product change?
    Changes in the prices of complements or substitutes can shift demand and affect market equilibrium.
  • Free trade among countries has what effect on prices?
    Free trade generally lowers prices by increasing competition and efficiency.
  • Under what circumstance is crowding out most likely to occur?
    Crowding out is most likely when government spending increases and reduces private sector investment.
  • Which is an example of an external cost?
    Water pollution from industrial waste is an example of an external cost.
  • Why might China place a tariff on Canadian lumber?
    China might place a tariff to protect domestic producers from foreign competition.
  • What is an economic challenge related to international business?
    Managing negative externalities such as pollution is an economic challenge in international business.
  • What measures the impact of a negative supply shock?
    A decrease in output and increase in prices measures the impact of a negative supply shock.
  • What is a disadvantage of an economic group?
    Economic groups may create negative externalities such as trade diversion.
  • Which activity is most likely to create a positive externality?
    Providing public education is most likely to create a positive externality.
  • What is always true about a negative externality?
    A negative externality imposes a cost on bystanders not involved in the transaction.