ECON 231 – Test 2

If there are external benefits associated with the consumption of a good or service:

In a situation where an externality occurs, the "third party" refers to those who:

It has been proposed that a government agency be charged with the task of determining the amount of pollution that the atmosphere (or a body of water) can safely absorb, establish "rights" to this limited amount of pollution, and sell those limited amount of rights to firms. The firms can then buy and sell these rights among themselves later. This approach is known as the:

In a free-market economy, a product which entails a positive externality will be:

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by:

When the production of a good generates external costs, the firm's supply curve will be:

In a free-market economy, a product which entails a positive externality will be:

External benefits in consumption refer to benefits accruing to:

In a market where negative externalities are associated with consumption and production, the equilibrium will not be efficient because:

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river find that they must clean up the river's water before it flows through their equipment.

Excludability means that when someone is consuming a good, then others are excluded from using the good anymore.

Private firms can hardly produce a public good profitably because of:

Encouraging conservation is especially difficult in the open ocean where it is impossible to either define or enforce property rights over fish.

A public good:

What are the two characteristics that differentiate private goods from public goods?

Rivalry means that when one person buys and consumes a product, it is not available for purchase and consumption by another person.

If the property rights for forests are clear and enforced, then:

One major reason why the survival of elephants is threatened is that:

"Tragedy of the Commons" points out all of the following, except:

Externality