Chapter 1/Ten Principles of Economics ? 21
139. An example of an externality is the impact of
a. John’s actions on Jane’s well-being.
b. John’s actions on John’s own well-being. c. society's decisions on society’s well-being. d. society's decisions on John’s well-being. ANS: A DIF: 1 REF: 1-2 TOP: Externalities MSC: Definitional
140. An example of an externality is the impact of
a. bad weather on the income of farmers.
b. the personal income tax on a person's ability to purchase goods and services. c. pollution from a factory on the health of people in the vicinity of the factory. d. increases in health care costs on the health of individuals in society. ANS: C DIF: 2 REF: 1-2 TOP: Externalities MSC: Interpretive 141. If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention. b. increased competition.
c. better informed market participants. d. weaker property rights. ANS: A DIF: 2 REF: 1-2 TOP: Externalities, Efficiency MSC: Interpretive
142. Which of these statements concerning externalities is correct?
a. There would be no justification for government involvement in the economy if it were not for externalities. b. An externality can only arise when one person (or a small group of persons) has the ability to unduly influence
market prices.
c. An externality can arise only when two or more countries are engaged in trade with one another. d. An externality arises when one person's actions have an impact on the well-being of others. ANS: D DIF: 2 REF: 1-2 TOP: Government, Markets MSC: Interpretive 143. If a copper refinery does not bear the entire cost of the smoke it emits, it will
a. not emit any smoke so as to avoid the en