18. When the benefits of an activity are received by those who are not directly

Question

18. When the benefits of an activity are received by those who are not directly involvesd a. a negative externality exists. b. the government is producing a free good. c. the society has to bear the burden of that particular activity. d. the govermment has to compensate for the loss in social welfare. e. a positive externality exists. 19. Which of the following is an example of a positive extermality? a. Smoking a cigarette b. Driving a less fuel efficient vehicle c. Setting up a chemicals factory in a residential area d. Overuse of chemical fertilizers e. Beekeepers keeping bees for honey 20. Social cost is a. the sum of fixed and variable costs b. the difference between the total cost and opportunity cost c. the sum of private and external costs d. the difference between the private and external cost e. sum of fixed costs and opportunity costs 21. When there exists a negative externality in case of a particular good and that is not reflected in the price: a. too little of that good is produced and consumed. b. too much of that good is produced and consumed c. nothing of that is either produced or consumed. d. the government completely prohibits the production of such goods. e. the resources are allocated to their highest-valued activity. 22. Which of the following is not a problem with a public good? a. b. c. d. e. An incentive to free-ride A public good is often underconsumed An absence of private property rights An inability to limit consumption to those who purchase the good A public good is usually underproduced

Explanation / Answer

18. E.) Positive externality exists

19 E.) beekeepers keeping bees for honey as they are doing something good for the society

20 C) The sum of private costs and external costs

21 E) The resources are allocated to the highest valued activity

22 b) Public good is often under consumed.

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