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Chapter 10(sample exercise)

Chapter 10(sample exercise) - Chapter 10Externalities 1 An...

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Chapter 10—Externalities 1. An externality exists when a. the government intercedes in the operation of private markets by forcing the market to adjust to the balance of supply and demand. b. markets are not able to reach equilibrium. c. a firm sells its product in a foreign market. d. a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives payment for that effect. 2. When negative externalities are present in a market 3. If a sawmill creates too much noise for local residents 4. Which of the following is an example of a positive externality? 5. When a beekeeper places his hives of bees in an orchard so that the bees can gather nectar to produce honey, the bees pollinate the orchard, which increases the yield of fruit. This benefits a. only the beekeeper. b. the beekeeper, but creates a negative externality because the bees are a hazard to the orchard owner. c. only the owner of the orchard. d. both the beekeeper and the orchard owner.
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