Question 1

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the supply curve and the marginal social benefits curve, then

Accepted Answer

When output occurs at the intersection of the supply curve and the marginal social benefits curve, the marginal social benefits (i.e. the value of the positive externalities) are equal to the marginal private costs. Therefore, the socially optimal level of output will be produced, which maximizes total welfare in the economy.

Question 2

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Accepted Answer

The intersection of the marginal social benefits curve and the supply curve represents the point where both private and social costs and benefits are taken into account. This means that production is occurring where the marginal social benefits (MSB) of the good equal the marginal social costs (MSC) of production. At this point, output is produced at the socially optimal level because all positive externalities are being taken into account. Therefore, choice A is the correct answer.

Question 3

Exhibit 30-2 ​

Refer to Exhibit 30-2. This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why?

Accepted Answer

The answer of Exhibit 30-2 ​

Refer to Exhibit 30-2. This...

Question 4

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

Accepted Answer

A positive externality is a benefit that is enjoyed by a third-party as a result of an economic transaction. In this case, Samantha receiving a flu shot not only lowers her own probability of getting the flu, but it also helps to prevent the spread of the flu to others in her community. This is a benefit that others receive without paying for it, making it a positive externality.

Question 5

When a positive externality exists,

Accepted Answer

A positive externality means that there are benefits to society that are not reflected in the private benefits that individuals or firms receive. Therefore, social benefits are greater than private benefits.

Question 6

The side effect of an action that increases the well-being of others is called

Accepted Answer

A positive externality is a side effect of an action that benefits others, often without the person taking the action intending to do so. For example, when someone gets vaccinated, they not only protect themselves from the disease but also reduce the likelihood of spreading the disease to others, which is a positive externality.

Question 7

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q₁ to Q₂ is the area of

Accepted Answer

The answer of Exhibit 30-2 ​

Refer to Exhibit 30-2. If...

Question 8

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the net social benefit of expanding output from Q₁ to Q₂ is the area of

Accepted Answer

The answer of Exhibit 30-2 ​

Refer to Exhibit 30-2. If...

Question 9

In which of the following situations would a positive externality most likely be involved?

Accepted Answer

Option B involves a positive externality as the beautification of the yards by Rodney's neighbors will also have a positive impact on Rodney's own property value and aesthetics, without any direct cost or effort on his part. The other options do not involve any significant impact on third parties.

Question 10

When negative externalities are involved, the market is said to

Accepted Answer

When negative externalities are present in a market, the cost to society of producing the good is greater than the cost to the producers. This means that the market overproduces, as producers do not take into account the negative effects their production has on society. Therefore, the market fails to allocate resources efficiently, and produces more of the good than is socially optimal.

Question 11

An externality is internalized

Accepted Answer

An externality is internalized when the person(s) or group that generated the externality incorporate into their own private cost-benefit calculations the external benefits (in the case of a positive externality) or the external costs (in the case of a negative externality) that third parties bear. This means that they take into account the impact of their actions on others and adjust their behavior accordingly.

Question 12

Given a positive externality, the marginal social benefits curve lies to the __________ of the demand curve, with the market output __________ the socially optimal output.

Accepted Answer

In the presence of a positive externality, the marginal social benefits (MSB) curve lies to the right of the private demand curve because it includes the additional benefits to society that are not captured by the private market. This results in the market output being less than the socially optimal output, as the market fails to account for the external benefits.

Question 13

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private benefit of expanding output from Q₁ to Q₂ is the area of

Accepted Answer

The private benefit of expanding output from QS1U1B11S1U1B0 to QS1U1B12S1U1B0 is the difference between the marginal private benefit (MPB) and the marginal private cost (MPC). In this case, the MPB is P1 and the MPC is S1U1B12. The private benefit is therefore the area of QS1U1B11S1U1B0AEQS1U1B12S1U1B0.

Question 14

Which of the following statements is false ?

Accepted Answer

Internalizing externalities involves adjusting for externalities so that the decision-maker takes into account the external costs or benefits of their actions. Therefore, saying that internalizing externalities is not the same as adjusting for externalities is false.

Question 15

When positive externalities are involved, the market is said to

Accepted Answer

Positive externalities lead to market failure because the market tends to underproduce goods or services that generate external benefits, not accounting for the positive impacts on third parties.

Question 16

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private cost of expanding output from Q₁ to Q₂ is the area of

Accepted Answer

The answer of Exhibit 30-2 ​

Refer to Exhibit 30-2. If...

Question 17

Exhibit 30-2 Refer to Exhibit 30-2. If Exhibit 30-2 exhibits a positive externality situation, then what is Q₂?

Accepted Answer

Q₂ is the socially optimal output-the quantity of output that exists if the external benefits associated with the positive externality are taken into account. At this output level, MSB equals marginal social cost (MSC) ensuring that resources are allocated efficiently.

Question 18

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Accepted Answer

When positive externalities are present, the marginal social benefit (MSB) is greater than the marginal private benefit (MPB). If output occurs at the intersection of the MSB curve and the supply curve, it means all benefits, including external benefits, are considered, leading to a higher output level than if only private benefits were considered.

Question 19

Which of the following statements is true?

Accepted Answer

When production of a good yields positive externalities but output is currently at the market level, a change in output to the socially optimal level will be a net change for the better. This is because the external benefits are not currently being taken into account by the market, so increasing output to the socially optimal level will lead to an overall increase in benefits. The increase in costs may be offset by the increase in benefits, so the net change would still be positive.

Question 20

If a person who generates a negative externality incorporates into his or her private cost-benefit calculations the effects that this externality will have on third parties, the externality has been

Accepted Answer

When a person incorporates the effects of a negative externality on third parties into their private cost-benefit calculations, the externality has been internalized. This means that the person is taking responsibility for the full social cost of their actions, rather than shifting some of that cost onto others. Internalizing externalities is often seen as a desirable outcome, as it can lead to more efficient and fair outcomes.

Quiz 17: Market Failure: Externalities, Public Goods, and Asymmetric Information

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the supply curve and the marginal social benefits curve, then

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Exhibit 30-2 Refer to Exhibit 30-2. This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why?

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

When a positive externality exists,

The side effect of an action that increases the well-being of others is called

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q₁ to Q₂ is the area of

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the net social benefit of expanding output from Q₁ to Q₂ is the area of

In which of the following situations would a positive externality most likely be involved?

When negative externalities are involved, the market is said to

An externality is internalized

Given a positive externality, the marginal social benefits curve lies to the of the demand curve, with the market output the socially optimal output.

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private benefit of expanding output from Q₁ to Q₂ is the area of

Which of the following statements is false ?

When positive externalities are involved, the market is said to

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private cost of expanding output from Q₁ to Q₂ is the area of

Exhibit 30-2 Refer to Exhibit 30-2. If Exhibit 30-2 exhibits a positive externality situation, then what is Q₂?

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Which of the following statements is true?

If a person who generates a negative externality incorporates into his or her private cost-benefit calculations the effects that this externality will have on third parties, the externality has been

Quiz 17: Market Failure: Externalities, Public Goods, and Asymmetric Information

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the supply curve and the marginal social benefits curve, then

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Exhibit 30-2 ​ Refer to Exhibit 30-2. This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why?

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a

When a positive externality exists,

The side effect of an action that increases the well-being of others is called

Exhibit 30-2 ​ Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q1 to Q2 is the area of

Exhibit 30-2 ​ Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the net social benefit of expanding output from Q1 to Q2 is the area of

In which of the following situations would a positive externality most likely be involved?

When negative externalities are involved, the market is said to

An externality is internalized

Given a positive externality, the marginal social benefits curve lies to the __________ of the demand curve, with the market output __________ the socially optimal output.

Exhibit 30-2 ​ Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private benefit of expanding output from Q1 to Q2 is the area of

Which of the following statements is false ?

When positive externalities are involved, the market is said to

Exhibit 30-2 ​ Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private cost of expanding output from Q1 to Q2 is the area of

Exhibit 30-2 ​ Refer to Exhibit 30-2. If Exhibit 30-2 exhibits a positive externality situation, then what is Q2?

Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

Which of the following statements is true?

If a person who generates a negative externality incorporates into his or her private cost-benefit calculations the effects that this externality will have on third parties, the externality has been

Exhibit 30-2 Refer to Exhibit 30-2. This graph represents a positive externality situation. Given this, which of the two curves, X or Y, represents marginal social benefits and why?

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q₁ to Q₂ is the area of

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the net social benefit of expanding output from Q₁ to Q₂ is the area of

Given a positive externality, the marginal social benefits curve lies to the of the demand curve, with the market output the socially optimal output.

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private benefit of expanding output from Q₁ to Q₂ is the area of

Exhibit 30-2 Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the private cost of expanding output from Q₁ to Q₂ is the area of

Exhibit 30-2 Refer to Exhibit 30-2. If Exhibit 30-2 exhibits a positive externality situation, then what is Q₂?