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Microeconomics
Learn the toughest concepts covered in Microeconomics with step-by-step video tutorials and practice problems by world-class tutors
Table of contents
Externalities
Externalities: Social Benefits and Social Costs
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Have you ever considered if your purchases have effects on others? There may be costs or benefits you're not considering!
1
concept
Negative Externality and Positive Externality
10m
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2
concept
Externalities on the Graph
14m
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3
Problem
Which of the following is an example of a positive externality?
A
Jim hires Dwight to trim the hedges at his house. Jim pays Dwight $100 for the service
B
While trimming the hedges, Dwight’s tools emit smoke that Jim’s neighbor, Pam, has to breathe.
C
Jim’s freshly cut hedges make the neighborhood more beautiful.
D
Jim’s community manager will pay him if he promises to keep his hedges trimmed on a regular basis.
4
Problem
If the production of a good causes a negative externality, then the social-cost curve will lie ________________ the supply curve, and the socially optimal quantity is _________________ than the equilibrium quantity.
A
Above; Greater
B
Above; Less
C
Below; Greater
D
Below; Less
5
Problem
Which of the following is true about externalities?
A
Positive externalities are efficient, but negative externalities are not efficient
B
Negative externalities are efficient, but positive externalities are not efficient
C
Both positive and negative externalities are efficient
D
Both positive and negative externalities are not efficient
