An externality is the uncompensated impact of
A. society's decisions on the well-being of society.
B. a person's actions on that person's well-being.
C. one person's actions on the well-being of a bystander.
D. society's decisions on the poorest person in the society.
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If a sawmill creates too much noise for local residents,
A. noise restrictions will force residents to move out of the area.
B. a sense of social responsibility will cause owners of the mill to reduce noise levels.
C. the government can raise economic well-being through noise-control regulations.
D. the government should avoid intervening because the market will always allocate resources efficiently.
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.
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.
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