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Unformatted text preview: ost and the private cost of an action.
2. “The social cost of an action is the cost imposed on members of society other than the
agent taking the action”. True of false?
3. Private surplus from an action is
A. is the difference between the social cost and the private cost of that action.
B. is the difference between the private benefit and the private cost of that action.
C. is the difference between the social benefit and the private cost of that action.
D. always less than the social surplus from that action.
4. A negative externality associated with some activity leads to a private optimum at
A. social surplus is not maximized.
B. there is too little of that activity from a social perspective.
C. external cost exceeds private cost.
D. All of the above.
5. A “unilateral externality”
A. is an externality that operates in only one direction.
B. is an externality associated with a one-time action (such as an oil spill).
C. is an externality whereby external agents are also source agents (as in traf...
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- Spring '14