A market failure is a less than efficient allocation of resources. These market

Question

A market failure is a less than efficient allocation of resources. These market failures can create:

A) external costs and external benefits

B) market crashes

C) internal rates to rise

D) stock prices to decrease

Externalties consist of______________.

A) only external cost

B) only external benefits

C) both external costs and external benefits

D) none of the above

Which of the following is NOT an example of a public good?

A) Public schools

B) Public parks

C) Public Bud

D) Public Safety

Which of the following is an example of a positive externality?

A) Your boss gives you a raise

B) you get a tax break

C) You have a coupon for your purchase

D) Your neighbor paints thier house

Which of the follwoing is an example of a negative externality

A) You get fired from your job

B) Your taxes go up

C) Gas prices go up

D) The factory near your house is polluting the air

Explanation / Answer

1- Market failures create externalities. Hence the answer is A.
2- externalities can be of 2 types - negative as well as positive. Hence it can create cost as well as benefits. So answer is C.

3- public good is a good or service which is provided without profit, either by the government or by a private individual or organization. Something which is non excludable and non rivalrous. Here except public bud, everything falls under the category of public good. So answer is C.

4- when your neighbor paints their house, your surrounding become clean and you get benefit by a hike in the price of your house also. Hence it is a positive externality. So the answer is D.

5- D. POLLUTION is a negative externality.

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