When the Social Cost of an Externality Is Lower Than

question 61

Multiple Choice

When the social cost of an externality is lower than its private cost:

• A)society is likely to benefit from a corrective tax
• B)the externality is a positive one and society will not consume enough of the good
• C)the externality is a positive one and society will consume too much of the good
• D)society will benefit from the introduction of tradeable permits for production of the good

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Definitions:

T-test

A statistical analysis method that contrasts the average values of two groups to ascertain if their difference is statistically significant.

Analysis of Variance (ANOVA)

A statistical method used to compare the means of three or more samples to find out if at least one of the sample means is different from the others.

Sum Squares Error (SSE)

A statistical measure used to determine the variance or deviation of observed values from the true values, often used in the context of linear regression analysis.

Between-treatments Variation

The differences in group means in an experiment that are attributed to the effect of the independent variable.