Lesson 1.3.2
1.3.2 Externalities Quiz: Pearson Edexcel Economics, Unit 1
20 questions
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Lesson 1.3.2, Externalities: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.
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The 20 questions
-
In economics, what is total social cost equal to?
- External minus private
- Private plus external
- Private minus external
- Private cost only
-
What term describes a benefit enjoyed by a third party outside an economic transaction?
- Social cost
- External benefit
- External cost
- Private benefit
-
A factory pollutes a river, harming local fishers. What type of cost is this for fishers?
- Private benefit
- External cost
- Private cost
- Social benefit
-
With negative production externalities, how does the socially optimal output compare to market output?
- Equal
- Lower
- Zero
- Higher
-
On a negative production externality diagram, where is the deadweight welfare loss located?
- Between MSB and MPB
- Below the demand curve
- Above the supply curve
- Between MSC and MPC
-
In a market with positive consumption externalities, how does market output compare to the social optimum?
- Socially optimal
- Under-provided
- Over-provided
- Productively efficient
-
On a positive consumption externality diagram, where is the potential welfare gain located?
- Between MSC and MPC
- At the social optimum
- Below the private equilibrium
- Between MSB and MPB
-
How does a government subsidy on solar panels affect the market supply curve?
- Shifts left
- Becomes vertical
- Remains unchanged
- Shifts right
-
How does a tax equal to marginal external cost affect market supply?
- Shifts supply left
- Shifts supply right
- Shifts demand left
- Shifts demand right
-
Why does a free market overproduce goods with negative externalities?
- Ignoring private costs
- Ignoring external benefits
- Ignoring external costs
- Ignoring consumer demand
-
What occurs when market equilibrium differs from the social optimum?
- Price stability
- Government failure
- Market failure
- Perfect competition
-
Compared to market equilibrium, how does a positive consumption externality affect socially optimal output?
- Zero output
- Lower output
- Higher output
- Unchanged output
-
If marginal private cost is MC = 2 + Q and external cost is 3, what is MSC?
- 2 + Q
- 5 - Q
- 6 + Q
- 5 + Q
-
Which of the following is an example of a negative externality of consumption?
- Industrial waste dumping
- Passive smoking
- Worker training programmes
- Healthcare vaccination
-
Why might a government subsidise university education using externality theory?
- Negative consumption externalities
- Negative production externalities
- Positive production externalities
- Positive consumption externalities
-
What condition causes welfare loss at market equilibrium for a good with negative production externalities?
- MPB exceeds MSC
- MSB exceeds MSC
- MPC equals MPB
- MSC exceeds MSB
-
What is a major difficulty in setting an indirect tax to internalise an externality?
- Measuring supply elasticity
- Calculating VAT rates
- Shifting consumer demand
- Valuing external costs
-
What describes the market outcome for a good with positive production externalities?
- Excess supply
- Overproduction
- Underproduction
- Social optimum
-
As output increases, how does a rising marginal external cost affect welfare loss per unit?
- It decreases
- It remains constant
- It becomes zero
- It increases
-
At what point is social welfare maximised in a market with externalities?
- MPC equals MSC
- MSB equals MSC
- MPB equals MPC
- MSB equals MPB
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