Question

Question 7

In Santa Monica, California, it was reported that a “finder’s fee”—an up-front payment of up to $5,000—was being required of prospective tenants seeking to rent special apartments. What is this an example of?

the black market

a price floor

price gouging

a government price ceiling

Question 8

Mesa Petroleum Company built a small park in front of its corporate office. This is an example of __________.

imposing external costs on its shareholders

providing a pure public good

providing external benefits to the community

assuming city responsibilities

Question 9

What is the most frequently cited example of an externality?

service charges

public protest

pollution

sales taxes

Question 10

A negative externality exists when __________.

all costs are taken into account in the demand curve

all costs are taken into account in the supply curve

the market demand curve is not the true demand curve

the marginal social costs are not taken into account in the supply cur

Answer 1

Question 7

In Santa Monica, California, it was reported that a “finder’s fee”—an up-front payment of up to $5,000—was being required of prospective tenants seeking to rent special apartments. What is this an example of?

price gouging

Reason: It is a way of exploiting consumers, by charging a higher price from them, for the necessary goods.

Question 8

Mesa Petroleum Company built a small park in front of its corporate office. This is an example of __________.

providing external benefits to the community

Reason: Due to the positive externality that would be imposed by the park, the company is providing external benefits to the community

Question 9

What is the most frequently cited example of an externality?

pollution

Reason: It is the most used example showing negative externality imposed on non smokers

Question 10

A negative externality exists when __________.

the marginal social costs are not taken into account in the supply curve

Reason: In case of negative externality, the external cost from provision of the good is not taken into account by the producer, leading to overproduction of the good.