Question

-Which of the following is NOT true about a negative externality?

		The government could impose a tax to reduce the externality
		The socially optimal price is higher
		The socially optimal quantity is higher
		A third party is bearing the cost of the sporting event

-What could cause the honeymoon effect?

		Increase in attendance
		A new stadium does not mask quality of play
		An increase in the teamâ s payroll
		A new stadium increases the quality of play

-Option value is defined as:

		The value of a playerâ s option to be traded
		The value of a teamâ s option to build a new stadium
		The value of the option to add additional luxury suites to the stadium
		The value one places on having the ability to go to a game if one chooses

-Which of the following is true about a positive externality?

		The government could impose a tax to reduce the externality
		The socially optimal price is higher
		The socially optimal quantity is higher
		A third party is bearing the cost of the sporting event

Answer 1

Question no. 1.
the one point which is not true about the negative externalities is that the socially optimal quantity is higher as the cost the society pays in negative externalities is higher than the price the producer has to pay therefore the quantity supplied by the producer will be higher than the socially optimal quantity.

Question 2 :

Honeymoon effect is basically an organisational psychology which denotes the relationship of employee's job change and job satisfaction. Here if we see all the examples the example of a new stadium increases the quality of the play is most suitable, as the honeymoon effect states that a voluntary job change results in increased job satisfaction. Here if we look into the above example the opening of a new stadium has resulted in improving the quality of the play therefore there is more satisfaction among the players.

Question no. 3

Option value is defined as our willingness to pay for maintaining an option is called “option value”. this includes building park, wildlife sanctuaries etc. the value of team's option to build a stadium falls under this as building an stadium captures the idea that individuals may still feel that they get a benefit from having access to publicly-provided services even if they’re not sure whether they’ll ever use them.

Question no. 4

In positive externalities occurs when the consumption of a good benefits third party. Therefore since the socially optimal benefits is high therefore the socially optimal quantity is also high.