1) Which of the following is an example of a positive externality?
a) Buying a gift for your sister.
b) Receiving a great deal at the local store.
c) Making improvements to your house.
d) None of these choices are examples of a positive externality.
2) When Lin receives a flu vaccination, it reduces the chance of him receiving the flu as well as the chance that his sister will get sick as well. His flu vaccination creates a(n):
a) external cost.
b) external benefit.
c) marginal social cost.
d) deadweight loss.
3) The private consumption of services that generate positive externalities, such as getting a college education, is usually _____ the socially optimal level of consumption.
a) greater than
b) equal to
c) less than
d) unrelated to
4) Since Dik always texts while he drives, he is generating a _______ to others, resulting in a shift of the supply curve to the ______.
a) external cost; right
b) external cost; left
c) external benefit; right
d) external benefit; left
5) Which of the following is not a common method by which the government controls pollution?
a) Issuing tradable permits to pollute.
b) Implementing a tax on pollution emitted.
c) Advertising the harmful effects of pollution to encourage firms to pollute less.
d) Setting a strict limit on the amount of pollution each firm can generate.