6. An appropriate government policy toward negative externalities is to
a. subsidize the activity that creates the negative externality.
b. impose a tax or fine on the activity that creates the negative externality.
c. pay money to the party that creates the negative externality.
d. impose a tax on recipients of the negative externality.
e. nationalize the assets of the entity creating the externality.
7. Motorcycle helmet laws have been controversial in some states. Riders prefer the feel of the wind on their faces. Others, however, point out that riders without helmets are more likely to suffer severe injury and run up hospital bills at public expense. Which of the following would most likely reduce the incidence of high bills for helmetless riders?
a. raise insurance rates for helmetless riders.
b. lower insurance rates for helmetless riders.
c. publish information on injury rates for helmetless riders.
d. subsidize hospitals.
e. request that motorcycle riders wear a helmet.
8. The “free rider†problem occurs when a good is
a. not available.
b. not excludable.
c. not depletable.
d. sold in free markets.
e. scarce.
9. National defense and coastal lighthouses are examples of
a. public goods.
b. private goods.
c. high marginal cost goods.
d. depletable goods.
e. excludable goods.
10. The City Symphony presents three open-air concerts in the city park pavilion during the spring and summer. Many who attend make donations for symphony expenses, but the donation is not required. Some who attend make no contributions. Economists would
a. classify the noncontributors as detrimental externalities.
b. call the concerts excludable events.
c. call the noncontributors free riders.
d. call the concerts depletable goods.
e. recommend that the city discontinue the free concerts.
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