Question 1

Explain how issues of rivalry and excludability lead greenhouse gas emissions to be called a negative private good.

Accepted Answer

The answer of Explain how issues of rivalry and excludability...

Question 2

According to Elinor Ostrom, what are the requirements for a sustainable user-managed common-resource property?

Accepted Answer

The answer of According to Elinor Ostrom, what are the...

Question 3

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is TRUE?

Accepted Answer

Flu shots generate a positive externality, similar to landscaping, because they not only benefit the individual receiving the shot (by protecting them from the flu) but also benefit others around them (by reducing the spread of the flu). This is unlike smoking, which generates a negative externality by harming the health of others.

Question 4

Which of these activities is the LEAST likely to generate an externality?

Accepted Answer

Hiking the Appalachian Trail over the summer is the least likely to generate an externality because it primarily affects the individual engaging in the activity without significantly impacting others' well-being or the environment in a negative or positive way, unlike the other options which have clear external impacts on public health and the environment.

Question 5

Which is TRUE regarding the Coase theorem?

Accepted Answer

The Coase theorem posits that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights. This means it doesn't matter which party is assigned the property rights as long as these conditions are met.

Question 6

Which of these actions is MOST likely to internalize a positive externality?

Accepted Answer

Providing an in-store discount card after getting a flu shot encourages individuals to get vaccinated, which not only benefits them but also others in the community by reducing the spread of the flu. This is a classic example of internalizing a positive externality, where a benefit is provided to encourage behavior that has positive effects on others.

Question 7

The marginal social cost curve lies _____ the marginal private cost curve when negative externalities exist; the marginal social benefit curve lies _____ the marginal private benefit curve when positive externalities exist.

Accepted Answer

The answer of The marginal social cost curve lies _____...

Question 8

In the following figure, what is the value of the external cost imposed by the activity generating the negative externality?

Accepted Answer

The answer of In the following figure, what is the...

Question 9

What type of government policy is generally used when a positive externality is present?

Accepted Answer

Subsidies are generally used when a positive externality is present because they encourage more of the beneficial activity that leads to the positive externality.

Question 10

Some of the mangos from your neighbor's mango tree drop into your yard. You don't like mangos, and the fallen mangos make it harder to mow your lawn. Your neighbor values the tree at $300, and your cost of dealing with it is $500. If your neighbor has the legal right to keep the tree, what would be an efficient outcome according to the Coase theorem?

Accepted Answer

According to the Coase theorem, if parties can negotiate without cost, they can reach an efficient outcome regardless of the initial allocation of rights. In this scenario, paying your neighbor $400 to cut down the tree is efficient because it is less than your cost of $500 to deal with the fallen mangos, and more than the neighbor's valuation of the tree at $300. This way, both parties are better off.

Question 11

When an activity has a private marginal benefit of D₁, a private marginal cost of S₁, and a positive externality, which curve best represents the social marginal benefit?

Accepted Answer

The answer of When an activity has a private marginal...

Question 12

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then production of the good is

Accepted Answer

When marginal social costs exceed marginal private costs due to externalities, it means that not all costs of production are being accounted for by the producer. This typically leads to overproduction of the good beyond the socially efficient level, as the producer does not bear the full cost of production.

Question 13

Which statement describes a public good?

Accepted Answer

Public goods are characterized by being nonrival in consumption (one person's consumption does not reduce the amount available for others) and nonexcludable (it is not possible to prevent anyone from using the good).

Question 14

Which of these is nonexcludable but rival?

Accepted Answer

Common property resources are nonexcludable because it is difficult to prevent anyone from using them, but they are rival because one person's use diminishes the ability of another person to use the resource.

Question 15

Paying $5 on Amazon to stream a movie is an example of a service that is _____ in consumption.

Accepted Answer

Paying for a streaming service like Amazon to watch a movie is an example of an excludable (because access can be restricted to those who pay) and nonrival (because one person's consumption does not diminish the ability of others to consume the same service) good.

Question 16

Which of these is a pure public good?

Accepted Answer

Environmental protection is a pure public good because it is non-excludable (everyone benefits from a clean environment regardless of whether they contribute to its upkeep) and non-rivalrous (one person's enjoyment of a clean environment does not diminish another's).

Question 17

The free rider problem typically results in a production of output that is

Accepted Answer

The free rider problem often leads to underproduction of a good or service because individuals assume they can benefit from the good without contributing to its cost, resulting in a quantity produced that is less than the socially optimal level.

Question 18

Which of these is the BEST example of a common property resource?

Accepted Answer

A common property resource is characterized by being non-excludable (everyone has access) but rivalrous (one person's use diminishes another's). A public recreational park fits this description best, as it is open to everyone but can become overcrowded, reducing its enjoyment for others.

Question 19

A subscription to Hulu is considered a public good with exclusion because it is

Accepted Answer

A subscription to Hulu is considered nonrival because one person's consumption of the streaming service does not reduce the amount available for others to consume. It is excludable because only those who pay for the subscription can access the service.

Question 20

The market demand for private goods is found by summing individual demands _____, and the total demand for public goods is found by summing individual demands _____.

Accepted Answer

The market demand for private goods is found by summing individual demands horizontally because each individual's demand adds to the total quantity demanded at each price level. For public goods, the total demand is found by summing individual demands vertically because public goods are non-rivalrous and non-excludable, meaning each individual's valuation of the good adds to the total value or willingness to pay for the good at any given quantity.

Quiz 13: Externalities and Public Goods

Explain how issues of rivalry and excludability lead greenhouse gas emissions to be called a negative private good.

According to Elinor Ostrom, what are the requirements for a sustainable user-managed common-resource property?

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is TRUE?

Which of these activities is the LEAST likely to generate an externality?

Which is TRUE regarding the Coase theorem?

Which of these actions is MOST likely to internalize a positive externality?

The marginal social cost curve lies _ the marginal private cost curve when negative externalities exist; the marginal social benefit curve lies _ the marginal private benefit curve when positive externalities exist.

In the following figure, what is the value of the external cost imposed by the activity generating the negative externality?

What type of government policy is generally used when a positive externality is present?

When an activity has a private marginal benefit of D₁, a private marginal cost of S₁, and a positive externality, which curve best represents the social marginal benefit?

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then production of the good is

Which statement describes a public good?

Which of these is nonexcludable but rival?

Paying $5 on Amazon to stream a movie is an example of a service that is _____ in consumption.

Which of these is a pure public good?

The free rider problem typically results in a production of output that is

Which of these is the BEST example of a common property resource?

A subscription to Hulu is considered a public good with exclusion because it is

The market demand for private goods is found by summing individual demands _, and the total demand for public goods is found by summing individual demands _.

Quiz 13: Externalities and Public Goods

Explain how issues of rivalry and excludability lead greenhouse gas emissions to be called a negative private good.

According to Elinor Ostrom, what are the requirements for a sustainable user-managed common-resource property?

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is TRUE?

Which of these activities is the LEAST likely to generate an externality?

Which is TRUE regarding the Coase theorem?

Which of these actions is MOST likely to internalize a positive externality?

The marginal social cost curve lies _____ the marginal private cost curve when negative externalities exist; the marginal social benefit curve lies _____ the marginal private benefit curve when positive externalities exist.

In the following figure, what is the value of the external cost imposed by the activity generating the negative externality?

What type of government policy is generally used when a positive externality is present?

When an activity has a private marginal benefit of D1, a private marginal cost of S1, and a positive externality, which curve best represents the social marginal benefit?

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then production of the good is

Which statement describes a public good?

Which of these is nonexcludable but rival?

Paying $5 on Amazon to stream a movie is an example of a service that is _____ in consumption.

Which of these is a pure public good?

The free rider problem typically results in a production of output that is

Which of these is the BEST example of a common property resource?

A subscription to Hulu is considered a public good with exclusion because it is

The market demand for private goods is found by summing individual demands _____, and the total demand for public goods is found by summing individual demands _____.

The marginal social cost curve lies _ the marginal private cost curve when negative externalities exist; the marginal social benefit curve lies _ the marginal private benefit curve when positive externalities exist.

When an activity has a private marginal benefit of D₁, a private marginal cost of S₁, and a positive externality, which curve best represents the social marginal benefit?

The market demand for private goods is found by summing individual demands _, and the total demand for public goods is found by summing individual demands _.