Match each of the following characteristics or scenarios with either the term negative externality or the term positive externality.
a. Overallocation of resources:
b. Tammy installs a very nice front garden, raising the property values of all the other houses on her block:
c. Market demand curves are too far to the left (too low):
d. Underallocation of resources:
e. Water pollution from a factory forces neighbors to buy water purifiers:
Ans:
A. Negative externality
B. Positive externality
C. Positive externality
D. Positive externality
E. Negative externality
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An advantage monetary policy has over fiscal policy is that monetary policy
A) can be quickly changed and implemented. B) is coordinated with fiscal policy. C) is approved by the president of the United States. D) affects consumption expenditure and investment without impacting international trade. E) has no multiplier effects.
Assuming that the demand and supply of a good both increased by the same amount, the new equilibrium would represent: a. an increase in price and an increase in quantity exchanged
b. no change in price and an increase in quantity exchanged. c. a decrease in price and a decrease in quantity exchanged. d. no change in price, and an indeterminate change in quantity exchanged.
If a binding price floor is imposed on the video game market, then
a. the demand for video games will decrease. b. the supply of video games will increase. c. a surplus of video games will develop. d. All of the above are correct.
A consumer will buy a new product rather than an existing product:
A. when the MU/P of the new product is less than the MU/P of the existing product. B. when the substitution of the new product for the old product increases the consumer's total utility. C. only if the new product has a lower price than the existing product. D. only if the MU of the new product exceeds the MU of the existing product.