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Externalities: Social Benefits and Social Costs quiz #2

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  • If the marginal cost of polluting decreased, what would happen?
    If the marginal cost of polluting decreased, firms may produce more pollution, increasing negative externalities.
  • What does crowding out mean in economics?
    Crowding out occurs when government activity reduces private sector investment.
  • If property rights are clearly defined, can the economy still experience externalities?
    If property rights are clearly defined and enforced, externalities can be internalized and reduced.
  • Why is measuring positive externalities of education difficult?
    Measuring positive externalities of education is difficult because benefits are often intangible.
  • Pigovian taxes and direct controls are two government solutions for which market situation?
    Pigovian taxes and direct controls address market failures caused by negative externalities.
  • Which is the clearest example of a positive externality?
    Vaccination is the clearest example of a positive externality.
  • What is an example of an action that generates a positive externality?
    Getting a flu shot generates a positive externality by reducing disease spread.
  • What is a market incentive used to discourage pollution?
    A tax on pollution is a market incentive to discourage pollution.
  • What activity could give rise to a negative externality?
    Industrial production that emits pollutants can give rise to a negative externality.
  • What are examples of negative externalities?
    Examples of negative externalities include air pollution, water pollution, and noise.
  • What is an example of a 'hidden' cost associated with basing production in a foreign location?
    Environmental damage not accounted for in production costs is a hidden cost.
  • How might foreign investment be problematic for a transitioning economy?
    Foreign investment may lead to negative externalities such as environmental harm.
  • What factor is most likely to result in low shipping and handling costs?
    Proximity to markets is most likely to result in low shipping and handling costs.
  • Which resource is sometimes unpredictable in terms of energy production?
    Renewable resources like wind and solar are sometimes unpredictable in energy production.
  • What is a likely consequence of overusing groundwater in coastal areas?
    Overuse of groundwater in coastal areas can result in saltwater intrusion, a negative externality.
  • Which term describes the individual use of products that can lead to externalities?
    Consumption describes the individual use of products that can lead to externalities.
  • What is an example of market failure?
    Overproduction due to negative externalities is an example of market failure.
  • What is one way US workers are affected when jobs are outsourced to less-developed countries?
    US workers may experience job loss, which can be a negative externality.
  • What is an example of a negative externality affecting free resources?
    Overfishing in public waters is a negative externality affecting free resources.
  • Which is an economic effect of adding healthier options to a school lunch program?
    Adding healthier options can create positive externalities by improving public health.
  • Which best describes a challenge in the Middle East resulting from oil production?
    Environmental degradation from oil production is a challenge and a negative externality.
  • Which two groups are negatively impacted when an import tariff is enacted?
    Consumers and foreign producers are negatively impacted by import tariffs.
  • Why are U.S. firms moving manufacturing jobs overseas?
    U.S. firms move jobs overseas to reduce costs, but this can create negative externalities like job loss.
  • What is true of voluntary export restraints?
    Voluntary export restraints limit exports to avoid stricter trade barriers.
  • What action might be part of a protectionist economic policy?
    Imposing tariffs is part of a protectionist economic policy.
  • If positive externalities exist in the market for flu shots, what is the result?
    The market will underproduce flu shots compared to the socially optimal level.
  • Why is it easier to identify the costs than the benefits of international trade?
    Costs are often direct and measurable, while benefits can be intangible and widespread.
  • How is the principle of 'there's no such thing as a free lunch' illustrated in a socialist economy?
    Resources used for one purpose create opportunity costs, even in a socialist economy.
  • What is an example of a market failure?
    Underproduction of education due to positive externalities is a market failure.
  • Which economic impact of computers was mentioned in this lesson?
    Computers can create positive externalities by increasing productivity.
  • To what type of externalities does the data on the map most directly relate?
    The data relates to externalities affecting environmental quality.
  • What is an example of a supply shock?
    A sudden increase in oil prices is an example of a supply shock.
  • Why are cartels difficult to operate?
    Cartels are difficult to operate due to incentives for members to cheat.
  • What is an example of a market failure involving a negative externality?
    A negative externality such as pollution is an example of a market failure.
  • What is a consequence of the perishable quality of services?
    Services cannot be stored, leading to potential inefficiencies.
  • Which scenario depicts the Leontief paradox?
    A country exports labor-intensive goods despite having capital abundance depicts the Leontief paradox.
  • Why are profits not guaranteed for firms supplying nonrenewable resources?
    Market fluctuations and externalities such as environmental regulations affect profits.