1. Which of the following is a positive externality?

New car prices go down when steel tariffs are removed.

Production costs are reduced when waste disposal laws are not enforced.

Assistance is given to disaster victims.

A star basketball player increases revenue at sports bars.

2. The Coase theorem allows society to correct an externality without having to go through the trouble of defining property rights.

True

False

3. If lower discount rates are used in developing environmental policies, the welfare of current generations is valued more than the welfare of future generations.

True

False

5. Market failures can arise when:

externalities exit.

there is a change in quantity demanded.

wages increase.

there is an increase in demand.

6. Anytime pollution is created during the production of a product, a free rider problem exists.

True

False