1. Which of the following is NOT an example of a negative externality? Select on
ID: 1166391 • Letter: 1
Question
1.
Which of the following is NOT an example of a negative externality?
Select one:
a. pollution from the chemical plant located near your house
b. a defective auto part that causes your car to break down
c. loud noises from your neighbor’s late night parties
d. fertilizer from a commercial farm that is carried to your yard during rains
2.
Which of the following is NOT true about subsidies?
Select one:
a. a subsidy is a government-provided financial incentive to encourage consumption
b. the goal of a subsidy is to increase quantity to the socially optimal level
c. a subsidy reduces the costs for consumers
d. a subsidy is firm-provided financial incentive to encourage consumption
3.
You are assigned to group for an end of term project. While three of you in the group are very committed, one student has repeatedly not completed tasks. Since each group member is given the same grade, you and the rest of the group pick up the slack. Which economic concept does this situation illustrate?
Select one:
a. Public good
b. Free rider problem
c. Social leach theory
d. Property Rights
4.
Which of the following is NOT an example of a positive externality?
Select one:
a. required vaccinations
b. public education
c. a public park
d. the invention of computers
Explanation / Answer
1) Negative externality means a cost that is suffered by third party due to some transaction. In this type of externality the third can be any individual or firm or resource which get effected.
Answer: a defective auto part that gets your car to break down
In the above case the transaction or activity is taking place between two parties where there is not external person or third party is getting effected due to that car break down.
2) subsidy is an economic support given by the government to people or firm or anything where some money is granted as financial support.
Answer: a subsidy is firm provided financial incentive to encourage consumption
Firms will not provide subsidies as government only provides subsidies where as firms give incentive as part of bonus to employees.
4) Positive externality is the benefit that a third party gets due any transaction .
In the above cases the invention of computer, public park , public education all this are positive externality as third party will get benefitted.Where as in required vaccination there is no third party involved.
Answer: required vaccinations.
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