Which of the following is an example of a negative externality?

1. A large computer company pays a settlement based on an anti-trust suit.
2. Your neighbor adds a new patio to their house, slightly raising your home’s value.
3. The government imposes a tariff on automobiles.
4. The government decides to increase subsidies for higher education.
5. A manufacturer pollutes the local river with waste generated from steel production.

From a social efficiency perspective, markets tend to ____________ goods that impose negative externalities if left unregulated.

1. produce the correct amount of
2. charge too much for
3. overproduce
4. underproduce
5. monopolize

Cap-and-trade, clearer defined property rights, and pollution charges are examples of addressing negative externalities through ____________ reforms.

1. monopolistic
2. market-based
3. command-and-control
4. price
5. international