An externality is Group of answer choices the total cost to society of producing an additional unit of a good or service. a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays. a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. the amount a consumer pays to consume an additional amount of a particular good.
Added by Ashley O.
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Step 1: An externality is a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. Show more…
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For each of the following examples, identify whether a positive or negative externality is present and whether there will be too little or too much of the activity relative to the socially optimal outcome. A. Jerome has a beautifully landscaped front lawn with lots of colorful flowers. Landscaped lawns produce a externality. landscaped lawns exist relative to the socially efficient quantity. B. Dave takes advantage of the low price of gas to purchase a sports utility vehicle. Sports utility vehicles generate a externality. sports utility vehicles are produced relative to the socially efficient quantity. C. Susan decides to walk to work instead of driving. Walking to work creates a externality. walks to work exist relative to the socially efficient quantity. D. Anita decides to smoke a cigarette while she is waiting at a busy bus stop. Cigarettes create a externality. cigarettes are produced relative to the socially efficient quantity.
Andrew D.
What type of externality (positive or negative) is present in each of the following examples? Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? Without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? a. Mr. Chau plants lots of colorful flowers in his front yard. b. Your next-door neighbor likes to build bonfires in his backyard, and sparks often drift onto your house. c. Maija, who lives next to an apple orchard, decides to keep bees to produce honey. d. Justine buys a large SUV that consumes a lot of gasoline.
1. A. If the production of a good yields a negative externality, then the social-cost curve lies (above, below) the supply curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each.) B. If the production of a good yields a positive externality, then the social-value curve lies to the (left, right) of the demand curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each) C. With government intervention, a market will tend to (over, under) supply products that produce positive externalities. Whereas with negative externalities, a market will tend to (over, under) supply products when there is no government intervention. (Circle the correct answer for each.)
Jennifer S.
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