Microeconomics: Externalities, Public Goods, And Market Failures

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Microeconomics: Externalities, Public Goods, and Market FailuresSave and SubmitQuestion 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.5 pointsQuestion 2Once a government has provided a public good, everyone:Answerpays the cost.can obtain the benefit.experiences positiveexternalities.experiences negative externalities.5 pointsQuestion 3One condition for individual bargaining to occur, according to the Coase theorem, is that there must be:Answer

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clearly defined property rights.many peopleaffected and involved.government intervention to establish bargaining.government creation of a market for externalities.5 pointsQuestion 4Consumer surplus:Answeris the difference between the maximum prices consumers are willing to pay for a productand the lower equilibrium price.the difference between the maximum prices consumers are willing to pay for a productand the minimum prices producers are willing to accept.the difference between the minimum pricesproducers are willing to accept for a productand the higher equilibrium price.rises as equilibrium price rises.5 pointsQuestion 5Suppose the government imposed a carbon tax on firms that emit pollution. ThenAnswerthe firms' marginal cost of production would increase, and the supply curves within themarket would shift to the left.the firms' marginal cost of production would decrease, and the supply curves within themarket would shift to the left.the firms' marginal cost ofproduction would increase, and the supply curves within themarket would shift to the right.the firms' marginal cost of production would decrease, and the supply curves within the

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