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Microeconomics: Externalities, Public Goods, And Market Failures

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    Microeconomics: Externalities, Public Goods, and Market Failures S ave and Submit Question 1 If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be: Answer taxed. prohibited. subsidized. left alone under the idea of laissez faire. 5 points Question 2 Once a government has provided a public good, everyone: Answer pays the cost. can obtain the benefit. experiences positive externalities. experiences negative externalities. 5 points Question 3 One 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 people affected and involved. government intervention to establish bargaining. government creation of a market for externalities. 5 points Question 4 Consumer surplus: Answer is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. rises as equilibrium price rises. 5 points Question 5 Suppose the government imposed a carbon tax on firms that emit pollution. Then Answer the firms' marginal cost of production would increase, and the supply curves within the market would shift to the left. the firms' marginal cost of production would decrease, and the supply curves within the market would shift to the left. the firms' marginal cost of production would increase, and the supply curves within the market would shift to the right. the firms' marginal cost of production would decrease, and the supply curves within the

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