IB Econ: Market Failure Questions from Socrative Quizzes

The following question were used on the two Socrative quizzes during the Market Failure unit.  Some of these questions might reappear on your exam ;)

Question: When the actions of consumers of producers gives rise to negative or positive side effects on other people who are not part of these actions, it is considered a(n)
Answer 1: externality
Answer 2: merit good
Answer 3: demerit good
Answer 4: ad valorem tax

Question: Pollution from a factory would be considered...
Answer 1: a negative production externality
Answer 2: a positive production externality
Answer 3: a positive consumption externality
Answer 4: a positive production externality

Question: Health problems from drinking sugary soft drinks would be considered...
Answer 1: a negative production externality
Answer 2: a positive production externality
Answer 3: a positive consumption externality
Answer 4: a negative consumption externality

Question: If a positive externality arises from the production of a good or service, the private sector firm will lack any incentive to raise output because
Answer 1: it does not receive any payment for the external benefit that is generated
Answer 2: there is a free-rider problem
Answer 3: producer surplus is eliminated
Answer 4: marginal private benefits of production exceed the marginal social benefits

Question: The socially optimum level of output of merit goods exists when
Answer 1: marginal social benefits exceed marginal social costs by the greatest amount
Answer 2: marginal social benefits exceed marginal private cost by the greatest amount
Answer 3: marginal social benefits equal marginal social costs
Answer 4: marginal social benefits equal zero

Question: Costs and benefits of consumption and production that are borne by third parties are known as
Answer 1: external costs and benefits
Answer 2: internal costs and benefits
Answer 3: marginal social costs and benefits
Answer 4: common access resources