Economics: Understanding Market Failures, Externalities, and Public Goods

A quiz on economic concepts such as market failures, externalities, and public goods, focusing on their impact on society.

Christopher Lee

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Economics: Understanding Market Failures, Externalities, and Public GoodsQuestion 1If some activity creates positive externalities as well as private benefits, then economic theory suggeststhat the activity ought to be:Answertaxed.prohibited.subsidized.left alone under the idea of laissez faire.Answer: subsidized.5 pointsQuestion 2Once a government has provided a public good, everyone:Answerpays the cost.can obtain the benefit.experiencespositive externalities.experiences negative externalities.Answer: can obtain the benefit.5 pointsQuestion 3One condition for individual bargaining to occur, according to the Coase theorem, is that there must be:

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