Set of True-False Questions: 1. Private markets often have a hard time providing
ID: 1119324 • Letter: S
Question
Set of True-False Questions:
1. Private markets often have a hard time providing public goods due to the free rider problem.
A. True B. False
2. According to the Coase Theorem, an externality usually requires government intervention in order to internalize the externality.
A. True B. False
3. When a negative externality exists, the private market overproduces the good connected with the negative externality.
A. True B. False
4. Tiger Woods is so highly compensated because he is the top player in an individual sport.
A. True B. False
5. According to the Coase Theorem, both positive and negative externalities can be internalized using persuasion.
A. True B. False
Explanation / Answer
Answer 1 - Private market often have a hard time providing public good due to the free rider problem. The given statement is true. The government provides public goods by free market due free rider problem. There are incentives for not paying for public goods.
Answer 2 - According to the Coase Theorem, an externality usually requires government intervention in order to internalize the externality. The given statement is false.
Answer 3 - When a negative externality exists, the private market overproduces the good connected with the negative externality. The given statement is true. The firms produce a market output then did not consider external cost to the society. They overproduce from efficient level.
Answer 4 - Tiger woods’ is so highly compensated because he is the top player in an individual sport. The given statement is true. Tiger woods plays golf.
Answer 5 - According to the Coase Theorem, both positive and negative externalities can be internalized using persuasion. The given statement is true. Persuasion can be a good me option to internalize the positive and negative externalities.
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