1 .An example of a social (as opposed to private) cost of smoking is _____ a) ta
ID: 1219037 • Letter: 1
Question
1.An example of a social (as opposed to private) cost of smoking is
_____
a) taxes on cigarettes,
b) the price of cigarettes,
c) second-hand smoke,
d) positive externalities
2. Positive externalities of goods lead to over or under production of
those goods?
3. One way to correct for positive externalities is to _____ the goods
that create them
a) tax,
b) increase the price,
c) subsidize,
d) reduce profit
4. Which is an example of an excludable and rival good?
a) National defense,
b) interstate road,
C) flat-screen TV’s,
d) the air we breathe
Explanation / Answer
1. c) second-hand smoke
It create cost for the others who does not smoke.
2. Over production because it creates more benefit than the benefit for which producing firm produces it.
3. b) increase the price
Positive externality occurs when action of an economic agent creates benefit for the others. So, when people benefits without paying for it then firm can internalize this externality by increasing its price.
4. C) flat-screen TV’s
All other are the examples of public good which are non excludable and non rival in consumption.
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