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Public Solutions to Externalities quiz #1

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  • What is an example of a trade sanction?
    A country imposes restrictions or penalties on another country's imports or exports to influence its behavior.
  • Which of these is an example of restrictions that government places on the use of business property?
    Zoning laws that limit the types of activities or businesses that can operate in certain areas.
  • What describes a surplus in the government budget?
    When government revenues exceed government expenditures in a given period.
  • What can the government use to address an externality?
    The government can use corrective taxes, subsidies, or quantity limits such as pollution permits.
  • The use of effective contracts with penalties could reduce which form of supply chain risk?
    It could reduce the risk of negative externalities by ensuring parties internalize the costs of their actions.
  • What is an advantage of government policies such as a carbon tax?
    They help internalize the external cost of pollution, leading to a more efficient market outcome.
  • What is true of privatization of state-owned enterprises?
    Privatization can increase economic efficiency by introducing market incentives and competition.
  • How do governments get involved in markets?
    By imposing regulations, taxes, subsidies, or setting quantity limits to address externalities.
  • What are examples of natural barriers to entry?
    High startup costs or control of essential resources that make it difficult for new firms to enter a market.
  • How does privatization help stimulate gains in economic efficiency?
    By allowing market forces to allocate resources, leading to better incentives and productivity.
  • What is the purpose of establishing economic sanctions?
    To influence another country's behavior by restricting trade or financial transactions.
  • What is it called when government controls business behavior through rules or laws?
    This is called regulation or command and control policy.
  • What could a European government do to promote trade?
    It could reduce trade barriers, enter into free trade agreements, or lower tariffs.
  • Why might it be advantageous to use nonrenewable resources over renewable resources?
    Nonrenewable resources may offer higher immediate returns or be more efficient for certain uses, despite long-term costs.
  • What can act as a buffer against unemployment?
    Government intervention, such as subsidies or public works programs, can help buffer against unemployment.
  • What is a certain way to encourage development of hybrid and electric vehicles?
    Providing subsidies or tax incentives for hybrid and electric vehicle production and purchase.
  • What is not a natural source of market power?
    Government-imposed regulations are not a natural source of market power; natural sources include control of resources or technology.
  • Trade agreements can cause jobs to go to countries that provide those jobs. What is the economic explanation for this?
    Trade agreements allow countries to specialize in industries where they have a comparative advantage, which can shift jobs internationally.
  • The primary benefit of a free trade agreement is that they:
    Increase economic efficiency by allowing countries to specialize and trade based on comparative advantage.
  • NIMS components are adaptable to planned events such as sporting events. a. true b. false
    True. NIMS components are adaptable to planned events.
  • What is a refusal to buy or use something in order to bring about change called?
    A boycott.
  • One way government solves problems is by:
    Implementing policies such as taxes, subsidies, or regulations to address market failures like externalities.
  • What is an official ban on trade or other commercial activity with a particular country called?
    An embargo.
  • What policies tend to favor business?
    Policies such as subsidies, tax breaks, or deregulation tend to favor businesses.
  • A natural monopoly occurs when:
    A single firm can supply the entire market at a lower cost than multiple competing firms due to economies of scale.
  • Government can internalize a negative externality by:
    Imposing a corrective tax equal to the external cost or setting quantity limits like pollution permits.
  • The elimination of organizations that operate between the producer and the consumer is called _____.
    Disintermediation.