1. An externality

a .enhances market efficiency.

b. refers to production or consumption that occurs outdoors.

c. is a private cost or benefit that results from the production or consumption of a good or service that is external to a market.

d. is a benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.

2.If the social benefit of consuming a good or a service exceeds the private benefit

A. a positive externality exists.

B. the market achieves economic efficiency.

C. a negative externality exists.

D. the sum of consumer surplus and producer surplus is maximized.

3. Steven Cheung examined the relationship between beekeepers and apple growers. Cheung noted that: "Pollination contracts usually include stipulations regarding the number and strength of ... [bee] colonies, the rental fee per hive, the time of delivery...the protection of bees from pesticides, and the strategic placing of hives." Cheung's suggests that the relationship between beekeepers and apple growers is an example of

A. how excessive legal costs can prevent economic efficiency from being achieved.

B. negative externalities.

C. government intervention improving economic efficiency.

D. the Coase Theorem.

4. Which of the following describes how a negative externality affects a competitive market?

A. The externality causes a difference between the private cost of production and the private benefit from consumption.

B. The externality causes consumer surplus to exceed producer surplus.

C. The externality causes a difference between the private cost of production and the social cost.

D. The externality causes a difference between the private cost of production and the equilibrium price.

5. Economists generally favor the use of tradable emissions allowances to reduce pollution. However, the use of these allowances has been criticized by some environmentalists. Which of the following describes this criticism?

A. Some environmentalists believe that the price of allowances is often too high for consumers to afford.

B. Some environmentalists believe that Pigovian taxes are a more efficient way to reduce pollution.

C. Some environmentalists oppose allowances on legal grounds; they believe the use of allowances is unconstitutional.

D. Some environmentalists believe the allowances give firms a license to pollute.