Market Failure-Externalities
Ayesha Khilji Market Failure-Externalities
With the help of this activity students would be able to identify and explain the private, external and social costs associated with consumption and production.
What is an externality?
A situation where the market fails to allocate resources efficiently
A situation where the government intervenes in the market
A situation where consumers and producers benefit from trade
A situation where supply and demand are in equilibrium
Which of the following is an example of a negative externality?
Planting trees in a community park
Reducing air pollution in a city
Smoking near non-smokers
Donating money to a charity
What is the main goal of government intervention in the presence of externalities?
To eliminate all externalities
To reduce the negative effects of externalities
To increase the positive effects of externalities
To promote economic efficiency
Which of the following is an example of a positive externality?
Using public transportation instead of driving a car
Producing goods and services for profit
Using natural resources sustainably
Polluting a river
What is the difference between private costs and social costs?
Private costs include external costs, while social costs do not
Private costs include internal costs, while social costs do not
Private costs include both internal and external costs, while social costs do not
Private costs include social costs, while social costs do not
Which of the following is an example of a market failure due to externalities?
A perfectly competitive market
A monopoly market
A market with negative externalities
A market with no government intervention
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