Questions and Answers
What is an externality?
The external costs or benefits that accrue to other individuals or society as a result of production or consumption.
Give an example of a positive production externality.
Bees owned by a beekeeper pollinate the fruit of a nearby orchard.
What is market failure in the context of a negative production externality?
When a factory releases toxic fumes into the atmosphere, causing poor health for nearby residents, the factory owner incurs no cost but others bear the cost.
Describe a positive consumption externality.
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What is an example of a negative consumption externality?
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Define market failure.
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Give an example of asymmetric information.
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How can market-based solutions reduce pollution?
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What is a regulatory measure combined with a market-based solution in the tobacco industry?
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What happens in a monopoly regarding market power?
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What is collusion in an oligopolistic market?
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Give an example of a public good.
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What does non-excludable mean in the context of public goods?
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What does non-rivalry mean in the context of public goods?
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Why do public goods lead to market failure?
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How does the government provide public goods?
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What is the role of the Competition and Consumer Protection Commission?
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What are the consequences of imperfect information for insurers?
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