Question

The private equilibrium quantity is ____ the socially optimal quantity in the case of negative consumption externalities. From society's viewpoint it would be efficient for ____ of the product to be consumed.

equal to; more

less than; more

greater than; less

less than; less

greater than; more

In the case of negative production externalities, the marginal social cost is ____ the marginal private cost and producers will ____ the product in a free market.

greater than; overproduce

greater than; underproduce

less than; underproduce

less than; overproduce

equal to; underproduce

One result of the Coase Theorem is that

it is impossible to resolve externality problems unless the government intervenes.

the outcome in terms of redistribution of income does not depend on the assignment of the property rights.

the outcome in terms of whether the externality-generating activity occurs does not depend on the assignment of the property rights.

mutually beneficial bargains are rare.

private parties will never willingly agree to being damaged by an externality generating activity.

Answer 1

1)

The private equilibrium quantity is greater than the socially optimal quantity in the case of negative consumption externalities. From society's viewpoint it would be efficient for less of the product to be consumed.

2)

In the case of negative production externalities, the marginal social cost is greater than the marginal private cost and producers will overproduce the product in a free market.

3)

One result of the Coase Theorem is that:

- the outcome in terms of whether the externality-generating activity occurs does not depend on the assignment of the property rights.