When positive externalities are present in a market
A. private benefits will be greater than social benefits.
B. social benefits will be greater than private benefits.
C. only government regulation will solve the problem.
D. the market will not be able to generate an equilibrium.
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Which of the following is an example of a positive externality?
A. Local high school teachers have pizza delivered every Friday for lunch.
B. Your neighbor plants a nice garden in front of his house.
C. An avid fisherman buys new fishing gear for his next fishing trip.
D. A local manufacturing plant pollutes a nearby stream.
Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?
A. They are equal.
B. The equilibrium quantity is greater than the socially optimal quantity.
C. The equilibrium quantity is less than the socially optimal quantity.
D. There is not enough information to answer the question.
If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should
A. encourage the production of computer chips with subsidies.
B. discourage the production of potato chips with taxes.
C. encourage the production of potato chips with subsidies.
D. discourage the production of computer chips with taxes.
Suppose that electricity producers create a negative externality equal to $5 per unit. Further suppose that the government imposes a $5 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?
A. They are equal.
B. The after-tax equilibrium quantity is greater than the socially optimal quantity.
C. The after-tax equilibrium quantity is less than the socially optimal quantity.
D. There is not enough information to answer the question.
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