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1、Chapter10/Externalitiesv731Chapter10ExternalitiesTRUE/FALSE1.Marketssometimesfailtoallocateresourcesefficiently.ANS:TDIF:2REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:MarketfailureMSC:Interpretive2.Whenatransactionbetweenabuyerandsellerd
2、irectlyaffectsathirdparty,theeffectiscalledanexternality.ANS:TDIF:1REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:ExternalitiesMSC:Definitional3.Buyersandsellersneglecttheexternaleffectsoftheiractionswhendecidinghowmuchtodemandorsupply.ANS
3、:TDIF:2REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:ExternalitiesMSC:Interpretive4.Inamarketcharacterizedbyexternalities,themarketequilibriumfailstomaximizethetotalbenefittosocietyasawhole.ANS:TDIF:1REF:10-0NAT:AnalyticLOC:Markets,market
4、failure,andexternalitiesTOP:ExternalitiesMSC:Definitional5.Inamarketwithpositiveexternalities,themarketequilibriumquantitymaximizesthewelfareofsocietyasawhole.ANS:FDIF:1REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:ExternalitiesMSC:Interp
5、retive6.Barkingdogscannotbeconsideredanexternalitybecauseexternalitiesmustbeassociatedwithsomeformofmarketexchange.ANS:FDIF:1REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:ExternalitiesMSC:Applicative7.Thesocialcostofpollutionincludesthepr
6、ivatecostsoftheproducersplusthecoststothosebystandersadverselyaffectedbythepollution.ANS:TDIF:1REF:10-1NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:ExternalitiesMSC:Definitional8.Organizersofanoutdoorconcertinaparksurroundedbyresidentialneighbor
7、hoodsarelikelytoconsiderthenoiseandtrafficcosttoresidentialneighborhoodswhentheyassessthefinancialviabilityoftheconcertventure.ANS:FDIF:1REF:10-1NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:NegativeexternalitiesMSC:Applicative9.Whenadriverenters
8、acrowdedhighwayheincreasesthetraveltimesofallotherdriversonthehighway.Thisisanexampleofanegativeexternality.ANS:TDIF:1REF:10-0NAT:AnalyticLOC:Markets,marketfailure,andexternalitiesTOP:Externalit
