True or false: externalities

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   An externality falls on someone outside the trade.

2. Statement is true

   No

   Statement

   All externalities are harmful to the third party.

3. Statement is true

   Yes

   Statement

   Social cost equals private cost plus external cost.

4. Statement is true

   Yes

   Statement

   Charging for pollution lowers the quantity produced.

5. Statement is true

   No

   Statement

   Marketable permits cannot be traded between firms.

Instructions

Tap True or False for each statement.

Explanation