Multiple Choice
Which of the following is a positive externality associated with the construction of the Hetch Hetchy Reservoir?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following is true of voluntary export restraints?
A
They increase the social benefits associated with externalities.
B
They are agreements between exporting and importing countries to limit the quantity of exports.
C
They are taxes imposed by the importing country on goods from abroad.
D
They are subsidies provided to domestic producers to encourage exports.
Verified step by step guidance1
Step 1: Understand the concept of voluntary export restraints (VERs). VERs are trade restrictions on the quantity of goods that an exporting country is allowed to export to an importing country, agreed upon by both countries.
Step 2: Recognize that VERs are not taxes or subsidies. Taxes on imports are called tariffs, and subsidies are financial supports given to producers, which are different from VERs.
Step 3: Identify that VERs are agreements, not unilateral actions. They involve cooperation between the exporting and importing countries to limit export quantities.
Step 4: Analyze the options given: VERs are not about increasing social benefits from externalities, nor are they taxes or subsidies, but rather agreements to limit exports.
Step 5: Conclude that the correct characterization of VERs is that they are agreements between exporting and importing countries to limit the quantity of exports.
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