Week 14 — Quiz · Externalities, Public Goods & Market Failure

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 8 · 10 questions · 10 points · closed to AI · one attempt
Auto-graded (Classic QTI): see F-quiz-week-14-qti.xml for the Canvas import. Every numeric answer is pre-computed; every externality/curve-shift claim is verified.

The questions (human-readable; answer key below)

Q1. A steel mill emits pollutants that reduce air quality for a nearby neighborhood. This is an example of —
A) A public good B) A negative externality C) A positive externality D) The free-rider problem

Q2. When a negative externality exists, the market equilibrium quantity —
A) Equals the socially optimal quantity B) Is less than the socially optimal quantity C) Exceeds the socially optimal quantity D) Cannot be determined without knowing the size of the tax

Q3. (Use these verified numbers.) In a market with MB = 50 − Q, MPC = 2 + Q, and a marginal external cost of $8 (so MSC = 10 + Q), the market equilibrium quantity is —
A) 10 B) 18 C) 24 D) 20

Q4. (Continuing Q3.) The socially optimal quantity in that market (where MB = MSC) is —
A) 24 B) 20 C) 18 D) 10

Q5. To correct the negative externality in Q3–Q4, the appropriate Pigouvian tax is —
A) $2 B) $4 C) $6 D) $8

Q6. A positive externality in production means the market —
A) Underproduces relative to the social optimum, and a subsidy corrects it B) Overproduces relative to the social optimum, and a tax corrects it C) Reaches the social optimum without intervention D) Overproduces, and a subsidy corrects it

Q7. The Coase theorem says that private parties can bargain to an efficient outcome regardless of who holds the property right, PROVIDED that —
A) The government establishes a Pigouvian tax B) The market price is above equilibrium C) Property rights are clear AND transaction costs are low D) The externality is negative, not positive

Q8. (Multiple-answer — select all that apply.) Which of the following are PUBLIC GOODS (non-rival and non-excludable)?
☑ A) National defense ☐ B) A Netflix subscription ☑ C) A broadcast TV signal ☐ D) A fish in the ocean ☐ E) A concert in a stadium with tickets

Q9. (True/False) "Public good" in economics means a good provided by the government. → False

Q10. (Matching) Match each good type to its rival/excludable classification.
- National defense → Non-rival and non-excludable (public good)
- A sandwich → Rival and excludable (private good)
- A fish in open water → Rival and non-excludable (common resource)
- A toll road with spare capacity → Non-rival and excludable (club good)
(Distractor: "Rival and non-rival at the same time.")

Answer key & feedback (instructor)

Quality gate (self-checked): Q3 (50−Q=2+Q → Q=24) and Q4 (50−Q=10+Q → Q=20) and Q5 (tax=EMC=8) all pre-computed in Python ✓; Q6 direction (positive → underproduction → subsidy) verified ✓; Q8 (defense + broadcast TV = public goods; Netflix = club; fish = common resource) confirmed against rival/excludable grid ✓; Q9 (False) confirmed ✓; no free numeric entry; ≥1 MA (Q8), ≥1 TF (Q9), ≥1 matching (Q10); distractors target named traps (overproduction direction, "public good = government-provided," tax vs. subsidy direction).