The impact of competition during the presence of negative externalities.

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Chapter 14, Problem 2SQ

To determine

The impact of competition during the presence of negative externalities.

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Why is a price change NOT an externality? Select one: a. A price change affects bystanders, not market participants. b. A price change does NOT change total costs or benefits, it only changes who buys the good. c. A change in price changes the marginal benefit of a good but does NOT change who buys and sells the good. d. A price change redistributes costs but not benefits.

1.A good with a negative externality is an example of a market failure because * a.The price does not fluctuate with supply and demand. b.The price of the product does not reflect the social cost. c.A good can be consumed by many people without them having to pay for it. d.The market is producing a good very few people want. 2.A good with a negative externality is an example of a market failure because * a.The price does not fluctuate with supply and demand. b.The price of the product does not reflect the social cost. c.A good can be consumed by many people without them having to pay for it. d.The market is producing a good very few people want.

If producing a good generates pollution (a negative externality), from a social perspective ... a. the price will be too low and the quantity produced will be too low. b. the price will be too low and the quantity produced will be too high.c. the price will be too high and the quantity produced will be too low. d. the price will be too high and the quantity produced will be too high. e. the price will be too low but the quantity produced will be correct.