Source: https://www.youtube.com/watch?v=6DfRVYoyPMg

1/ Which of the following is an example of a negative externality shown in the video?

Answering a cell phone during an economics class.

Garbage on the streets of Boston.

Chemical pollution of the Delaware River.

A beautiful flower garden next to a busy walkway.

2/ The production of paper involves a negative externality because it produces chemicals that pollute the environment. If there is no intervention in the market for paper then the marginal benefits of paper are ___________ the marginal social cost of paper and ________ paper is produced.

less than, too little.

less than, too much.

bigger than, too much.

bigger than, too little.

3/ A negative externality causes a market failure because:

It leads to taxes that disrupt the efficient working of markets.

It causes too little capital to be used in production.

It eliminates trade in the product that involves the externality.

It leads to overproduction of the product that involves the externality.

4/ Placing a tax on cell phone calls in class:

Raises the private marginal benefit of taking a cell phone call in class.

Lowers the private marginal benefit of taking a cell phone call in class.

Raises the private marginal cost of taking a cell phone call in class.

Lowers the private marginal cost of taking a cell phone call in class.

5/ It follows from the Solman video that subsidizing the cost of a bus ticket

Raises the private marginal cost of taking a bus ride.

Raises the private marginal benefit of taking a bus ride.

Lowers the private marginal cost of taking a bus ride.

Lowers the private marginal benefit of taking a bus ride.

6/ The technological research involves a positive externality because it produces positive effects for society. If there is no intervention in the market for technological research then the marginal benefits of technological research are ___________ the marginal social cost of technological research and ________ technological research is produced.

less than, too little.

bigger than, too much.

bigger than, too little.

less than, too much.

7/ Pollution is a problem because those who pollute do not face all the costs associated with their activities. If polluters had to pay all the costs of their activities, they would pollute less.

True

False