Defining Positive externality

Using the table below, answer the question. 

7. What can the government do so that an efficient amount is produced?

a. Subsidize suppliers $8 per unit.

b. Subsidize suppliers $2 per unit.

c. Tax suppliers $2 per unit.

d. Tax suppliers $8 per unit.

Using the table below, answer the question. 

4. The table represents the market for a good with

a. only an external cost.

b. only an external benefit.

c. both external costs and benefits.

d. no externalities.

Using the table below, answer the question. 

5. Left unregulated, the equilibrium quantity will be

a. 550.

b. 600.

c. 650.

d. 700

Using the table below, answer the question. 

6. The efficient level of output is

a. 550.

b. 600.

c. 650.

d. 700.

8. Which of the following is a possible government solution to the problem posed by a good with an external benefit?

a. Tax the consumption of the good.

b. Tax the production of the good.

c. Subsidize the production of the good.

d. All of the above are possible solutions.

9. Which of the following statements about knowledge is FALSE?

a. Knowledge can have an external benefit.

b. Patents help create incentives for creating knowledge and do so without any cost.

c. Intellectual property rights can help create incentives for the accumulation of more knowledge.

d. As a productive resource, knowledge might not be subject to diminishing productivity.

11. An external benefit(positive externality) implies that private markets will provide ____ and an external cost(negative externality) implies that private markets will provide _____ of the good (relative to the social optimum).  

a. too much; too much

b. too little; too little

c. too much; too little

d. too little; too much

12. The relationship between marginal private cost (MC), marginal external cost, and marginal social cost (MSC) is

a. MC = MSC + marginal external cost.

b. marginal external cost = MC + MSC.

c. MSC = MC + marginal external cost.

d. None of the above answers is correct.

13. To offset the externality from knowledge, governments use all of the following except

a. patents.

b. taxes.

c. below-cost provision.

d. copyrights.

14. When a student makes a decision about whether to go for college education or not, the student considers only the

a. private marginal benefits and private marginal costs.

b. social marginal benefits and social marginal costs.

c. marginal external benefits and marginal external costs.

d. private marginal benefits and social marginal costs.

15. Which of the following is not an example of an activity with external benefits?

a. Having your smoking car repaired.

b. Planting flowers in the front yard of your house.

c. Staying home from class when you have the flu.

d. Eating a pizza in the dining hall.

3. Common resources 

a. are owned by specific people.

b. refers to goods “owned” by society at large and freely usable by anyone.

c. are inexhaustible.

d. refers strictly to the land resource.

1. Which of the following applies to ‘externalities’?

a. They are not normally reflected in the market price of a product.

b. They are always negative.

c. They are always responsible for a welfare loss.

d. They are the private costs of economic behavior.

2. In the case of a positive externality, social marginal cost will

a. have no specific relation to private marginal cost.

b. be equal to private marginal cost.

c. fall short of private marginal cost.

d. exceed private marginal cost.

10. If a good has an external benefit(positive externality associated with the production of the good), a market left unregulated will produce

a. less than the efficient amount.

b. the efficient amount.

c. more than the efficient amount.

d. an amount that may be more than, less than, or equal to the efficient amount depending on how large the external benefit is relative to the private benefit.