Economics: Negative and Positive Externalities

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What is the effect of a tax imposed on the seller of a good?

Lowers the supply curve downward

Raises the demand curve

Raises the supply curve upward (correct)

Lowers the demand curve

How does a tax affect the demand curve when the buyer pays the tax?

Raises the supply curve

Moves the supply curve downward

Raises the demand curve

Moves the demand curve downward (correct)

What happens to the amount of a good consumed if the supply and demand curves are price elastic and a tax is imposed?

It increases

It lowers (correct)

It stays the same

It slightly decreases

What does the imposition of externality taxes often require?

Considerable public transaction costs Signup and view all the answers

Who postulated that externalities are a problem of unclear or inadequate property rights?

Ronald Coase Signup and view all the answers

What option does a firm have if it owns the right to impose negative externalities?

Resell those rights to another willing firm Signup and view all the answers

Which of the following is an example of a tolerable externality?

Water extraction from rivers Signup and view all the answers

Who decides the allowable level of externality and initial rights allocation for externalities society is willing to tolerate?

Government representatives Signup and view all the answers

What can be a possible consequence of an improperly set externality tax?

Incorrect level of market improvement Signup and view all the answers

When externalities are considered property rights, what becomes possible?

Reselling externality rights Signup and view all the answers

Economics: Negative and Positive Externalities

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Questions and Answers

What is the effect of a tax imposed on the seller of a good?

How does a tax affect the demand curve when the buyer pays the tax?

What happens to the amount of a good consumed if the supply and demand curves are price elastic and a tax is imposed?

What does the imposition of externality taxes often require?

Who postulated that externalities are a problem of unclear or inadequate property rights?

What option does a firm have if it owns the right to impose negative externalities?

Which of the following is an example of a tolerable externality?

Who decides the allowable level of externality and initial rights allocation for externalities society is willing to tolerate?

What can be a possible consequence of an improperly set externality tax?

When externalities are considered property rights, what becomes possible?

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