Quiz 7

Question 1

Externality

Answer 1

An actions taken by a person or firm that imposes benefits or costs outside of any market exchange.

Question 2

Market failure

Answer 2

Failure of private decisions in the marketplace to achieve an efficient allocation of scarce resources

Question 3

Social costs

Answer 3

costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution

Question 4

Command and control regulation

Answer 4

laws that specify allowable quantities of pollution and that also may detail which pollution-control technologies one must use

Question 5

Pollution charge

Answer 5

a tax imposed on the quantity of pollution that a firm emits; also called a pollution tax

Question 6

Marketable permit program

Answer 6

a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms

Question 7

Positive externalities

Answer 7

beneficial spillovers to a third party or parties

Question 8

Public Good

Answer 8

good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers

Question 9

Free rider

Answer 9

those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided

Question 10

Nonexcludable

Answer 10

when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it