Questions
MUF0061 Economics Unit 1 - Semester 1, 2025 Revision Quiz: Externalities (5 - 10 minutes)
Single choice
When production or consumption of a product causes negative effects on third parties, we say that
Options
A.a. a subsidy should be provided to the consumers of that product.
B.b. the price of that product must be too high.
C.c. there is an over-allocation of resources towards this product.
D.d. the equilibrium quantity traded in the market is too low.
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Step-by-Step Analysis
Carefully consider the concept of negative externalities in production or consumption.
Option a: a subsidy should be provided to the consumers of that product. A subsidy would reduce the price for consumers and potentially increase demand, which could worsen the negative externality ......Login to view full explanationLog in for full answers
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