12.1

Question 1

What progress has the U.S. made since the 1970s?

Answer 1

The U.S. has made progress in reducing pollution through various policies.

Question 2

What are some major environmental issues that remain despite reductions in pollution?

Answer 2

High levels of air and water pollution, hazardous waste disposal, destruction of wetlands and wildlife habitats, and human health impacts from pollution.

Question 3

What is an externality?

Answer 3

An externality (or spillover) is the effect of a market exchange on an uninvolved third party.

Question 4

Can externalities be positive or negative?

Answer 4

Yes, externalities can be either positive or negative.

Question 5

What is pollution in the context of externalities?

Answer 5

Pollution is an example of a negative externality that imposes external costs on society.

Question 6

How are social costs calculated?

Answer 6

Social costs are calculated as private costs plus external costs.

Question 8

What is market failure?

Answer 8

Market failure occurs when the market does not allocate resources efficiently.

Question 9

What is a key example of market failure?

Answer 9

Externalities are a key example of market failure.