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How well do you understand positive externalities and their impact on society?

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How well do you understand positive externalities and their impact on society?

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Questions and Answers

What happens when a positive externality occurs?

The consumption or production of a good benefits a third party (correct)

The consumption or production of a good harms a third party

The consumption or production of a good has no effect on a third party

The consumption or production of a good benefits only the producer

What is the result of positive externalities in the market?

Over-consumption and market success

Under-consumption and market failure (correct)

Over-consumption and market failure

Under-consumption and market success

How can government intervention help increase demand for goods with positive externalities?

By imposing taxes on the production of such goods

By decreasing the supply of such goods

By providing subsidies to the production of such goods (correct)

By banning the production of such goods

What is the recommended diagram for representing positive externalities of consumption?

<p>The positive externality diagram (B)</p> Signup and view all the answers

What is the benefit of switching from conventional to organic farming?

<p>It can have positive externalities for society (D)</p> Signup and view all the answers

Study Notes

Positive externality occurs when the consumption or production of a good benefits a third party.
It leads to under-consumption and market failure.
Government intervention can be used to increase demand for goods with positive externalities.
A subsidy can overcome market failure caused by positive externalities.
The positive externality diagram of consumption is generally advised for simplicity.
Positive externality can be defined as a decision by an individual that benefits others.
Switching from conventional to organic farming can have positive externalities for society.
The benefit of the switch to organic is not limited to the farmer himself.
Positive externalities lead to a social benefit.
Positive externalities can be dealt with through government policies.

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Description

Test your knowledge on positive externalities with this informative quiz! Learn about the effects of consumption and production of goods on third parties, and how government intervention can be used to overcome market failure. From subsidies to organic farming, explore various examples of positive externalities and how they can benefit society. Sharpen your understanding of this important economic concept and gain insights into potential solutions for dealing with positive externalities. Take the quiz now!