When the social costs of producing or consuming a good exceed the private costs, _____.
a. a positive externality exists
b. an inefficiently high quantity of the good will be produced and consumed, from the society's point of view
c. the direct consumers of the good will bear the external costs
d. the individuals involved in the production of the good do not bear the private costs
e. the quantity of the good produced will be less than the socially efficient level
QUESTION 2An economy's PPC illustrates the extent to which the economy consumes what it produces.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3When all the costs and benefits of a transaction are borne by the participants of that transaction, _____.
a. the market outcome will be inefficient
b. the private costs and social costs are identical
c. negative externalities exist
d. positive externalities exist
e. the free rider problem arises
QUESTION 4A nation's production possibilities curve PPC will shift outward if its workers receive better training.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5Which of the following statements is true?
a. In the case of positive externalities, a private market will produce too little of a good compared to the socially efficient level of output.
b. In the case of positive externalities, a private market will produce too much of a good compared to the socially efficient level of output.
c. Negative externalities occur when benefits accrue to individuals not directly involved in a transaction.
d. Positive externalities occur when costs are imposed on individuals not directly involved in a transaction.
e. In the case of negative externalities, a private market will produce too little of a good compared to the socially efficient level of output.
QUESTION 6If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.
a. True
b. False
Indicate whether the statement is true or false
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