Multiple Choice
Which of the following is a disadvantage of an economic group in the context of externalities, social benefits, and social costs?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following has contributed to the problems Vietnam is facing with its coffee revenues?
A
High tariffs imposed by Vietnam on imported coffee beans
B
Government subsidies increasing the market price of coffee
C
Decreased global demand due to improved coffee quality in Vietnam
D
Negative externalities from overuse of fertilizers and pesticides affecting soil quality
Verified step by step guidance1
Step 1: Understand the context of the problem, which is about factors affecting Vietnam's coffee revenues. Revenues depend on both the quantity sold and the price received in the market.
Step 2: Analyze each option to see how it might impact coffee revenues. For example, high tariffs on imported coffee beans could affect costs but not necessarily revenues directly from exports.
Step 3: Recognize that government subsidies increasing market price would typically raise revenues, so this is unlikely to cause problems with revenues.
Step 4: Consider the effect of decreased global demand. If demand falls, prices and revenues would fall, but the problem states improved coffee quality in Vietnam, which should increase demand, so this option is inconsistent.
Step 5: Identify that negative externalities from overuse of fertilizers and pesticides can degrade soil quality, reducing coffee yield and quality over time, which directly harms production and thus coffee revenues. This explains the problem Vietnam is facing.
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