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The external costs of alcohol consumption are related to, among other things, death and injury related to auto accidents caused by drunk drivers. These costs have been estimated to be about $.47 per ounce of alcohol consumed. Taxes on alcohol amount to $.23 per oz. This suggests that alcohol consumption is

greater than the socially optimal amount.

Which of the following is NOT an example of a public good?

shopping malls

The principal reason we no longer see huge herds of bison (popularly known as "buffalo") on the American prairies is because

those who own prairie land don't want bison on their property.

When is a buyer NOT willing to spend a lot of time and energy researching the market?

when the savings to be made are small

A positive externality or spillover benefit occurs when:

the benefits associated with a product exceed those accruing to people who consume it

A person who consumes a good or service but does not pay for it is called which of the following?

A free rider

The socially optimal amount of pollution abatement occurs where society's marginal:

benefit of abatement equals its marginal cost of abatement.

Positive externalities are created by people when they act in ways that

benefit others without their intending to do so.

Since there is no easy way for a tulip grower to charge for the beauty he adds to an area, he will

produce too few tulips

An externality is

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

The noise of jet engines is not a negative externality for baggage handlers

because they are paid to live with the noise.

Which of the following is a critical rule for determining whether something is a public good?

The total benefits to society are greater than the total cost.

Goods and services provided by the government for free or at greatly reduced prices are

public goods

Which of the following is the best example of a public good?

A highway system

A new runway has opened up at the airport, and the flight path goes directly over your apartment. The noise of the airplanes is a

Negative externality

Another term that economists use for negative externalities is

Spillover costs

You will still be able to get public broadcasting whether or not you contribute to their fundraising campaign. You decide not to contribute. This is an example of the

Free-rider problem

An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume is

An externality

The tendency for society to overuse and therefore abuse common resources is called the:

Tragedy of the commons

A negative externality or spillover cost occurs when:

the total cost of producing a good exceeds the costs borne by the producer

Economists would not want to say that you were "littering" when you toss your peanut shells under your seat at a major league baseball game because

those in charge of putting on the game don't mind at all

What is a positive externality?

an economic side effect that generates unexpected benefits

Someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good is a

Free rider

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