11.Acostimposedonsomeonewhoisneithertheconsumernortheproduceriscalleda
a.correctivetax.
b.commandandcontrolpolicy.
c.positiveexternality.
d.negativeexternality.
12.Anexternalityariseswhenapersonengagesinanactivitythatinfluencesthewell-beingof
a.buyersinthemarketforthatactivityandyetneitherpaysnorreceivesanycompensationforthateffect.
b.sellersinthemarketforthatactivityandyetneitherpaysnorreceivesanycompensationforthateffect.
c.bystandersinthemarketforthatactivityandyetneitherpaysnorreceivesanycompensationforthateffect.
d.Both(a)and(b)arecorrect.
13.Anexternalityexistswhenever
a.theeconomycannotbenefitfromgovernmentintervention.
b.marketsarenotabletoreachequilibrium.
c.afirmsellsitsproductinaforeignmarket.
d.Bobbiengagesinanactivitythatinfluencesthewell-beingofRosaandyetBobbineitherpaysnorreceivespaymentforthatinfluence.
14.Anegativeexternalityariseswhenapersonengagesinanactivitythathas
a.anadverseeffectonabystanderwhoisnotcompensatedbythepersonwhocausestheeffect.
b.anadverseeffectonabystanderwhoiscompensatedbythepersonwhocausestheeffect.
c.abeneficialeffectonabystanderwhopaysthepersonwhocausestheeffect.
d.abeneficialeffectonabystanderwhodoesnotpaythepersonwhocausestheeffect.
15.Apositiveexternalityariseswhenapersonengagesinanactivitythathas
a.anadverseeffectonabystanderwhoisnotcompensatedbythepersonwhocausestheeffect.
b.anadverseeffectonabystanderwhoiscompensatedbythepersonwhocausestheeffect.
c.abeneficialeffectonabystanderwhopaysthepersonwhocausestheeffect.
d.abeneficialeffectonabystanderwhodoesnotpaythepersonwhocausestheeffect.
16.Whenexternalitiesarepresentinamarket,thewell-beingofmarketparticipants
a.andmarketbystandersarebothdirectlyaffected.
b.andmarketbystandersarebothindirectlyaffected.
c.isdirectlyaffected,andmarketbystandersareindirectlyaffected.
d.isindirectlyaffected,andmarketbystandersaredirectlyaffected.
17.Dogownersdonotbearthefullcostofthenoisetheirbarkingdogscreateandoftentaketoofewprecautionstopreventtheirdogsfrombarking.Localgovernmentsaddressthisproblemby
a.makingitillegalto”disturbthepeace.”
b.havingawell-fundedanimalcontroldepartment.
c.subsidizinglocalanimalshelters.
d.encouragingpeopletoadoptcats.
18.Whichofthefollowingstatementsaboutawell-maintainedyardbestconveysthegeneralnatureoftheexternality?
a.Awell-maintainedyardconveysapositiveexternalitybecauseitincreasesthehome’smarketvalue.
b.Awell-maintainedyardconveysanegativeexternalitybecauseitincreasesthepropertytaxliabilityoftheowner.
c.Awell-maintainedyardconveysapositiveexternalitybecauseitincreasesthevalueofadjacentpropertiesintheneighborhood.
d.Awell-maintainedyardcannotprovideanytypeofexternality.
19.Sincerestoredhistoricbuildingsconveyapositiveexternality,localgovernmentsmaychooseto
a.regulatethedemolitionofthem.
b.providetaxbreakstoownerswhorestorethem.
c.increasepropertytaxesinhistoricareas.
d.Bothaandbarecorrect.
20.Allexternalities
a.causemarketstofailtoallocateresourcesefficiently.
b.causeequilibriumpricestobetoohigh.
c.benefitproducersattheexpenseofconsumers.
d.causeequilibriumpricestobetoolow.
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