Module 6 Practice Exam V14 Answer Key
1. B: Household pay taxes to the Government.
2. D: Selling a portion of his holdings are an increase in income (wages, rent, dividends) and the
increase in income requires more taxes paid to the government.
3. B: Externalities are unintended consequences to third parties.
4. C: Air is considered a free resource. This map shows how a free resources are being effected by
emissions.
5. A: A new factory would mean better salaries for employees and higher tax revenue. They can
use this money for better schools.
6. C: If the company is causing destruction in Brazil, it will lead to a greater distrust of companies
from Canada.
7. B: The point of energy efficient light bulbs is to help the environment. If they cannot be recycled,
then it would defeat the purpose of being environmentally friendly.
8. A: Most of the time if you apply at two jobs you are willing to work at either one. Normally pay
rates will be the determining factor.
9. C: an increase in air pollution. Remember externalities are costs and benefits to the third party.
Florida’s Congress did not intend for increased air pollution because of the coal shipping and
because it creates unintended air pollution this is considered a negative externality.
10. A: Due to Starbucks moving next doors some consumers will go to Starbucks instead of the local
coffee shop.
11. D: when thinking about the relationship between the household and government you have to
remember what the household gives to the government which is money from taxes in exchange
the government spends the tax money on programs like those to clean up the pollution
12. B: The question asks for a positive externality for the local people. The fact that many people
would now need to be employed to build the project, as well as keep it running would be a
positive effect.
13. A: the workers would feel the negative impact the most because they would now be without a
job, income, etc. While the designers will feel a negative impact, it will only be temporary as
they can find a new store to sell their merchandise.
14. C: This connection would occur because due to an environmental issue, the government is
having a direct impact on the households by forcing the residents to stay indoors.
15. A: They will be able to manufacture Hardy at only 2/3rds the labor force, therefore, leading to
an increase in the unemployment rate. In addition, the new alloy will reduce the demand for
steel, also leading to the reduction of the workforce. The household pays taxes so that the
government can pay for programs for the households. As a result in the reduction of the labor
force, there will be a decrease in revenue generated by taxes, ultimately leading to a decrease in
social programs provided by the government to the households.
16. C: The question asks how will M and S negatively impact the local environment. When
constructing new roads, they must first prep the ground and surrounding area. An inference
must be made that as they are prepping, the local ecosystem will be disturbed. In addition,
another interference can be made that with the increase in delivery trucks, it will also lead to an
increase in air pollution within the area.
17. C: Solar power use may result in households needing solar panes, new roofing materials, wires,
etc., that the local hardware store will stock. Thus the hardware store will make a greater profit.
18. B: An increase of people in the area normally results in greater litter in the surrounding areas.
19. A: Non-profits are often funded by local governments. Cutting sales taxes might result in the
layoff of workers.
20. (A): “An externality would be "positive" if these consequences are desirable and welcome
effects on third parties.” See page 2 of Lesson 6.02. Added services would be a positive
consequence enjoyed by the community.
21. (B): School districts receive a lot of their funding from local property taxes. Increases in taxes
begin when schools request additional funds from local governments to remain in operation
which results in the form of a higher taxes.
22. (B): Companies would have to off-set the add expense of producing less emissions or paying a
fine which could result in job-loss. It is the only negative effect on the list.
23. C – Answer choice is the only positive listed here. The other answer choices would all be
negative externalities associated with the new Walmart opening.
24. B – Point D on the circular flow diagram represents the relationship between the household and
the government. High school students receiving scholarships would best represent the effect of
this relationship on the household.
25. C – The only positive externality listed here is under answer C. New business opening due to the
manufacturing plant will have a positive effect on unemployment and the overall local economy.
26. B: The cost to build would allow jobs to be created and the unemployment rate would decrease
is the best positive externality as it would have the most impact on a third party.
27. A: an increase in the vegetation and fish population would be a unforeseen positive effect of the
algae growth.
28. B: A positive externality means we are looking for a positive third effect. Jacket sales going up
would be an initial effect. 3 more days of school and Gas prices going up are not positive effects
while approved overtime for workers would be a positive 3rd effect because they have to
provide for the cleanup but are being given the overtime.
29. C: All but the third option are positive effects. The fast food restaurant is the third party and a
decrease in business means less jobs overall for the community.
30. A: Hospital visits rise would be the negative externality as the ones getting sick are not directly
related to the initial problem and since they are not well it is a negative effect. If a new doctor is
hired that is a positive effect and neighboring businesses are happy to have increased business.
Factory workers losing their jobs would be a negative impact but directly as they are the ones
who worked for the factory.