Multiple Choice
Which of the following is a result of government attempts to increase energy efficiency?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following can be reduced by the use of renewable energy sources?
A
Negative externalities associated with air pollution
B
Marginal social benefits of energy consumption
C
Private costs of energy production
D
Positive externalities from technological innovation
Verified step by step guidance1
Step 1: Understand the concept of externalities. Externalities are costs or benefits that affect third parties who are not directly involved in an economic transaction. Negative externalities impose costs, while positive externalities provide benefits.
Step 2: Identify what renewable energy sources impact. Renewable energy typically reduces pollution because it produces less harmful emissions compared to fossil fuels, thus reducing negative externalities related to air pollution.
Step 3: Analyze each option:
- Negative externalities associated with air pollution: Renewable energy reduces pollution, so this can be reduced.
- Marginal social benefits of energy consumption: This refers to the total benefit to society from consuming one more unit of energy, which is not necessarily reduced by renewable energy.
- Private costs of energy production: These are the costs borne by producers, which may or may not decrease with renewable energy.
- Positive externalities from technological innovation: Renewable energy can increase positive externalities, not reduce them.
Step 4: Conclude that renewable energy sources primarily reduce negative externalities associated with air pollution because they lower harmful emissions compared to traditional energy sources.
Step 5: Therefore, the correct answer is the reduction of negative externalities associated with air pollution.
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