What results from the presence of a negative externality in a market?

Multiple choice question for Externality & Internality. Select an option, then review the explanation below.

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The social cost curve lies beneath the supply curve (private cost curve) for the productNone of the provided options are correctThe social cost curve is positioned below the supply curve (private cost curve) for the productThe social value curve is higher than the demand curve (private value curve) for the product

Explanation

A negative externality causes the social cost curve to be lower than the supply curve (private cost curve) for the good, indicating that the true cost to society is less than the private cost borne by producers.

Practice related questions from the same subject.

1.What is the primary function of tradable pollution permits?
2.The gas-guzzler tax imposed on new vehicles with poor fuel efficiency serves as an example of which economic concept?
3.Roberto and Thomas share a university dorm room. Roberto enjoys playing loud music, valuing it at €100, while Thomas prefers silence, valuing peace at €150. Assuming Roberto has the legal right to play loud music and there are no costs involved in negotiation, which of the following best describes an efficient outcome to this externality issue?
4.Which of the following is not classified as a transaction cost borne by parties when negotiating to address a pollution externality?
5.According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?

What results from the presence of a negative externality in a market?

Explanation

More Externality &amp; Internality MCQs

More Externality & Internality MCQs