1.) If a market has a positive externality, the social optimum is a greater quantity than the private market equilibrium.

a. False, markets with positional externalities overproduce.

b. True, markets with positive externalities underproduce.

c. False, markets with negative externalities underproduce.

d. True, markets with positive externalities overproduce.

2.) After the pandemic, if the city of Pasadena increased sales tax by 1% to help pay for some of the economic recovery efforts, this would be considered a ________.

a. Headcount tax

b. Proportional tax

c. Regressive tax

d. Progressive tax

3.) Real-estate agents are considered middlemen and often charge high fees for their services. Your friend is buying a house and says that they aren't going to use a real-estate agent because they are a waste of money. After taking this class, you tell them___________________.

a. Middlemen only increase costs and shouldn't be used when possible.

b. Not to use the agent because it will increase the time you spend looking for a house.

c. To only use a real-estate agent if the search costs are low.

d. Using a real-estate agent can save money because they reduce information costs.