Which of these is a negative production externality? An airline manufacturer must hold up production of a plane at great cost due to delays in its global supply chain. O A cereal manufacturer suffers losses due to a drought and unexpected increases in market prices of grains that it uses in its cereals. O Consumers complain to the wrong regulators about price gouging in gasoline markets. A producer of lead for batteries that are used nationwide emits noxious gases in its factory town and local people are getting sick.

Which of the following describes the type of entry barrier faced for municipal sewage services? O A. There is a natural entry barrier for municipal sewage services because it is cheaper to have only one sewer system serving a given region. B. There is a natural entry barrier for municipal sewage services because entry into the market has been limited by government restriction. C. There is a created entry barrier for municipal sewage services because entry into the market has been limited by the economies of scale. D. There is a created entry barrier for municipal sewage services because it is cheaper to have only one sewer system serving a given region.

Which activity generates a negative externality? O The only two hardware stores in town agree to form a cartel and fix prices. O You buy a neA Lexus and then discover it needs a new alternator. O After Judith buys life insurance, she begins skydiving classes on the weckends. O Your neighbor starts his noisy construction project at 6:00 a.m. on weekends.

A negative externality will cause a private market to produce Select one: a. less than is socially desirable. O b. more than is socially desirable. c. less than the same market would produce in the presence of a positive externality. O d. exactly the quantity that is socially desirable.

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Supply 10.00 9.00 8.00 7.00 6.00 MSC 5.00 4.00 Demand 3.00 2.00 1.00 25000 50000 75000 100000 125000 150000 175000 200000 If a tax or subsidy were used to correct the externality, what would be chosen? O a. tax = $4 O b. subsidy = $3 O C. tax = $3 O d. subsidy = $4 B.

Which statement about externalities is wrong? O Markets are typically not efficient in dealing with externalities O Externalities can be positive or negative O A firm naturally takes into account negative externalities that result from their production O Interventions such as carbon taxes can help correct externalities gative externalities imply that the social cost is high than the internal (or private) cost

Due to a firm generating external costs (a negative externality), the government decides to ________ the firm. In response, the firm will produce ________ units of output in order to continue maximizing profits and reach the new producer equilibrium. Question 4Answer a. tax; fewer b. subsidize; more c. tax; more d. subsidize; fewer

Write down a model of positive production externality with two firms, in which theproduction activities of one firm directly affects the production/cost of the other firm.State and explain the key assumptions of the model. Using the model, answer thefollowing questions:(a) Explain why the presence of a positive production externality could prevent therealisation of an efficient outcome.(b) Name a possible cure for the positive production externality and explain how itcould solve the inefficiency problem.