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Economics Quiz: Externalities and Equality

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Economics Quiz: Externalities and Equality

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Questions and Answers

What is meant by an externality?

The direct financial outcome of a transaction between two parties.

The total value created by economic activities within a business.

An internal cost experienced by an individual or business only.

A benefit or cost that affects a third party who did not choose to incur that benefit or cost. (correct)

Which concept focuses on fairness in resource distribution?

Equity (correct)

Efficiency

Equality

Profitability

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

A new road reducing travel time for commuters.

An educational program that enhances the skills of the workforce.

Pollution from a factory affecting the health of nearby residents. (correct)

A park built that increases property values in the area.

What does economic efficiency imply?

<p>Maximum productivity with minimum waste of resources.</p> Signup and view all the answers

Which of the following best defines equality in economics?

<p>Focusing on equal outcomes for all individuals.</p> Signup and view all the answers

Study Notes

Externalities

An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit.
It can be either positive or negative.

Fairness in Resource Distribution

The concept of distributive justice focuses on fairness in resource distribution.

Negative Externalities

A negative externality is a cost that is imposed on a third party without their consent.
Example: Air pollution from a factory affects nearby residents, even though they did not choose to live near the factory.

Economic Efficiency

Economic efficiency implies that resources are allocated in a way that maximizes overall welfare.
This means that resources are used to produce the goods and services that people value the most, and that those goods and services are distributed to the people who value them the most.

Equality in Economics

Equality in economics refers to the fair distribution of economic resources and opportunities.
It is often contrasted with efficiency, as policies that promote equality may sometimes come at the cost of efficiency, and vice versa.

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Description

Test your understanding of externalities and the concepts of fairness and equality in economics. This quiz covers essential principles related to resource distribution and economic efficiency. Challenge yourself and see how well you grasp these fundamental ideas.