Question 1
Your upstairs neighbor is the first-chair violinist in the local symphony orchestra. Because you are very fond of violin music, you sit on your balcony each night to listen to her rehearse. In this case, your violin-playing neighbor is an example of a
◦ public good.
◦ good that imposes an external cost.
◦ good that provides an external benefit.
◦ Pareto good.
Question 2
Which of the following is an example of an external benefit?
◦ More people start to install solar panels on their roofs, and as a result, electricity use goes down as does the pollution created by the generation of electricity.
◦ Firms are able to reduce their costs of production by using a more efficient technology.
◦ The city spends $500,000 to upgrade the local jail.
◦ A company opens a slaughterhouse at the end of your street.