Negative Externalities and Social Optimization Quiz
28 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which of the following best defines a normative economic principle?

  • A principle that measures economic welfare
  • A principle that predicts how people will behave
  • A principle that assesses market efficiency
  • A principle that says how people should behave (correct)

    • What does welfare economics study?

  • How equilibrium in the market maximizes total welfare
  • How buyers and sellers benefit from participating in the market
  • How the supply and demand curves relate to consumer and producer surplus
  • How the allocation of resources affects economic wellbeing (correct)

    • How is consumer surplus measured using the demand curve?

  • The area below the demand curve and above the price (correct)
  • The difference between the amount a seller is paid and the seller's cost
  • The difference between the maximum amount a buyer will pay and the amount the buyer actually pays
  • The area above the demand curve and below the price

    • Which of the following is an advantage of standards over market-based instruments?

    <p>Standards are easy to understand</p> Signup and view all the answers

    What is a disadvantage of standards compared to market-based instruments?

    <p>Firms have no incentives to reduce pollution beyond the standard</p> Signup and view all the answers

    What do tradable pollution permits combine?

    <p>Command-and-control approach with market-based instruments</p> Signup and view all the answers

    According to the text, what does the area below the price and above the supply curve measure in a market?

    <p>Producer surplus</p> Signup and view all the answers

    What kind of allocation would a fictional benevolent social planner choose to maximize society's well-being?

    <p>The quantity supplied and demanded must maximize total surplus received by all members of society.</p> Signup and view all the answers

    What does the equilibrium allocation in a perfectly competitive market achieve?

    <p>Maximizes total surplus</p> Signup and view all the answers

    What conditions must be satisfied for the equilibrium outcome to be an efficient allocation?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is true about the social optimum in the presence of a negative externality?

    <p>The social optimum is determined by the intersection of the social cost and demand curves.</p> Signup and view all the answers

    What is the effect of a positive externality in consumption?

    <p>The demand curve does not change from the situation without external benefit.</p> Signup and view all the answers

    What is true about the market equilibrium in the presence of a positive externality?

    <p>The market participants trade too high a quantity.</p> Signup and view all the answers

    What is one way to deal with positive externalities in consumption?

    <p>Internalising the externalities by subsidising the sellers.</p> Signup and view all the answers

    According to welfare economics, what does consumer surplus measure in a market?

    <p>The net benefit that buyers receive from a good</p> Signup and view all the answers

    What does producer surplus measure in a market?

    <p>The net benefit that sellers receive from a good</p> Signup and view all the answers

    What does the area below the demand curve and above the price measure in a market?

    <p>Consumer surplus</p> Signup and view all the answers

    Which of the following is a disadvantage of standards compared to market-based instruments?

    <p>Firms have incentives to reduce pollution beyond the standard</p> Signup and view all the answers

    What do tradable pollution permits combine?

    <p>Command-and-control with market-based instruments</p> Signup and view all the answers

    What is the effect of a positive externality in consumption?

    <p>Consumers consume more than the socially optimal level</p> Signup and view all the answers

    According to the text, what does the area below the price and above the supply curve measure in a market?

    <p>Producer surplus</p> Signup and view all the answers

    What kind of an allocation would a fictional benevolent social planner choose to maximize society's well-being?

    <p>Allocation that maximizes total surplus</p> Signup and view all the answers

    What allocation is chosen in a competitive market?

    <p>Allocation based on demand of goods</p> Signup and view all the answers

    What is the effect of a negative externality in production?

    <p>Increase in social cost</p> Signup and view all the answers

    Which of the following is true about the social optimum in the presence of a positive externality?

    <p>The socially optimal level is larger than the equilibrium quantity.</p> Signup and view all the answers

    What is one way to deal with negative externalities in production?

    <p>Imposing a tax on the producer to reduce the equilibrium quantity.</p> Signup and view all the answers

    What is one way to deal with positive externalities in consumption?

    <p>Subsidizing the buyers to increase the equilibrium quantity.</p> Signup and view all the answers

    What is the command-and-control approach in environmental policy?

    <p>Setting a standard and monitoring and enforcing it.</p> Signup and view all the answers

    More Like This

    Negative Externalities in Technological Innovation
    10 questions

    Negative Externalities in Technological Innovation

    AgileCanyon avatar
    AgileCanyon
    Externalities (Chapter 7)
    19 questions

    Externalities (Chapter 7)

    GratifyingRetinalite296 avatar
    GratifyingRetinalite296
    Chapter 10,11 PART2
    10 questions

    Chapter 10,11 PART2

    ExemplaryRealism avatar
    ExemplaryRealism
    Chapter 11: Greed, Competition and Externalities
    26 questions

    Chapter 11: Greed, Competition and Externalities

    DeliciousRutherfordium8129 avatar
    DeliciousRutherfordium8129
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser