Question :
9.1 Externalities
1) An externality occurs when ________.
A) the quantity demanded : 1377425
9.1 Externalities
1) An externality occurs when ________.
A) the quantity demanded of a good exceeds the quantity supplied
B) the quantity supplied of a good exceeds the quantity demanded
C) the government regulates production and consumption decisions
D) an economic activity affects third parties not engaged in the activity
2) The market demand curve for a good shows ________ and the market supply curve shows ________.
A) consumers’ willingness to pay for the good; producers’ marginal cost of producing the good
B) producers’ marginal cost of producing the good; consumers’ willingness to pay for the good
C) consumers’ willingness to pay for the good; the opportunity cost of producing the good
D) consumers’ willingness to pay for the good; producers’ total cost of producing the good
3) ________ occurs when an economic activity has a spillover cost that does not affect those directly engaged in the activity.
A) A positive externality
B) A negative externality
C) A gain in producer surplus
D) A gain in consumer surplus
4) Traffic congestion is an example of a ________.
A) positive externality
B) negative externality
C) pecuniary externality
D) free-rider problem
5) The social cost of producing a good that generates negative externalities is the sum of the ________.
A) average variable cost and average fixed cost of production
B) average total cost and the marginal cost of production
C) private cost and external costs of production
D) total fixed cost and total variable cost of production
6) If the production of a good gives rise to negative externalities, ________.
A) the fixed cost of production is zero
B) the variable cost of production is zero
C) the private cost of production exceeds the social cost of production
D) the social cost of production exceeds the private cost of production
7) The marginal social cost curve ________ when production involves negative externalities.
A) is parallel to the horizontal axis
B) is parallel to the demand curve
C) lies above the supply curve
D) lies to the right of the supply curve
8) In a market, social surplus is maximized if ________.
A) consumers’ willingness to pay for the good equals the marginal private cost of producing the good
B) consumers’ willingness to pay for the good equals the marginal external cost of producing the good
C) consumers’ willingness to pay for the good equals the marginal social cost of producing the good
D) consumers’ willingness to pay for the good equals the opportunity cost of producing the good
9) If negative externalities are present in a market, ________.
A) the price charged in the market is higher than the socially optimal price
B) the quantity supplied in the market is larger than the socially optimal level
C) the marginal social cost of production is lower than the marginal private cost
D) the average cost of production exceeds the marginal cost of production at all output levels
10) If the production of a good involves negative externalities, ________.
A) the quantity of the good supplied in the market is lower than the efficient level
B) the optimal price of the good is higher than the price charged in the market
C) total welfare can be increased by increasing the production of the good
D) average cost of production can be reduced by increasing output above the optimal level
