Title: QUIZ: Externalities -- Economic Lowdown Audio Series
Course: Andria Testing FRE2 > Section: Externalities -- Economic Lowdown Audio Series

Q: When the cost of a transaction spills over to a third party, the effect is called a(n) __________.
- positive externality
- positional externality
- negative externality
- internal externality
A: negative externality

Q: When the benefit of a transaction spills over to a third party, the effect is called a(n) __________.
- positive externality
- positional externality
- negative externality
- internal externality
A: positive externality

Q: Government can internalize a negative externality by __________.
- taxing the activity that generates the externality
- subsidizing the activity that generates the externality
- outlawing the activity that generates the externality
- fully funding the activity with taxpayer money
A: taxing the activity that generates the externality

Q: Government can encourage a positive externality by __________.
- taxing the activity that generates the externality
- subsidizing the activity that generates the externality
- outlawing the activity that generates the externality
- fully funding the activity with taxpayer money
A: subsidizing the activity that generates the externality

Q: Which of the following statements best illustrates a positive externality?
- A well-maintained yard increases the home's market value.
- A well-maintained yard increases the property tax liability of the owner.
- A well-maintained yard makes other homeowners in the neighborhood jealous.
- A well-maintained yard increases the value of adjacent properties in the neighborhood.
A: A well-maintained yard increases the value of adjacent properties in the neighborhood.

Q: Emissions that result from the production of paper are a good example of a negative externality because __________.
- there are fines for air pollution
- air pollution is no longer an issue in our economy
- paper-producing firms are generally unaware of environmental regulations
- paper-producing firms will not include the cost of pollution in their production costs
A: paper-producing firms will not include the cost of pollution in their production costs