Economics-Externalities?

1.Which of the following situations probably would NOT generate a negative externality?


A.One person smoking cigars among several other people in a closed room


B.A rock concert next to the library during final exam week


C.A paid tutor instructing Antonio in economics as fellow classmate Cathy listens in without anybody knowing it


D.Using a loud eaf blower on your yard early on a Sunday morning





2.To reach the socially efficient level of output, the size of a unit tax imposed on a firm generating a negative externality should be equal to:


A.The difference between the marginal social cost and the firm's marginal private cost


BThe firm's marginal private cost


C.The marginal social cost


D.The sum of the marginal social cost and the firm's marginal private cost

Economics-Externalities?
1. C. A paid tutor instructing Antonio in economics as fellow classmate Cathy listens in without anybody knowing it





2. A.The difference between the marginal social cost and the firm's marginal private cost
Reply:A negative externality is when a person/company/any entity engages in something that produces a "bad" which negatively affects those around them without incurring any cost or penalty (hence, it is "external" since the "person" doing something bad is not being charged/taxed/penalized).





now, do your own hw.