Answer to Question #52971 in Microeconomics for Yana

Question

MULTIPLE CHOICE
1. An externality occurs when:
a. people other than those making the demand and supply decisions share the benefits or the
costs of an activity.
b. only the people making the demand and supply decisions share the benefits or the costs of
an activity.
c. private costs equal social costs.
d. private costs of production are ignored.

2. When a firm's activities create a negative externality:
a. the marginal social cost curve will lie everywhere below the firm's marginal private cost curve.
b. the marginal social benefit curve will lie everywhere below the firm's marginal private benefit curve.
c. the marginal social cost curve will lie everywhere above the firm's marginal private cost curve.
d. the marginal social benefit curve will lie everywhere above the firm's marginal private benefit curve.

Answer 1

a. people other than those making the demand and supply decisions share the benefits or the  costs of an activity.
c. the marginal social cost curve will lie everywhere above the firm's marginal private cost curve.