Economics: Understanding Market Failures, Externalities, and Public GoodsQuestion 1If some activity creates positive externalities as well as private benefits, then economic theory suggeststhat the activity ought to be:Answertaxed.prohibited.subsidized.left alone under the idea of laissez faire.Answer: subsidized.5 pointsQuestion 2Once a government has provided a public good, everyone:Answerpays the cost.can obtain the benefit.experiencespositive externalities.experiences negative externalities.Answer: can obtain the benefit.5 pointsQuestion 3One condition for individual bargaining to occur, according to the Coase theorem, is that there must be:Preview Mode
This document has 9 pages. Sign in to access the full document!