Turn the Volume Down or Pay Up to £100

Answer the following questions to check your understanding of the story.

What type of externality is playing loud music on buses?

a) Negative consumption externality

b) Positive production externality

c) Positive consumption externality

d) Negative production externality

Why do some passengers decide to play loud music?

Passengers who play loud music __________.

a) do not experience diminishing marginal benefit

b) consider their private marginal benefit and ignore the external benefit imposed on other passengers

c) are maximizing their private marginal benefit

d) consider their private cost and ignore the external cost imposed on other passengers

Will imposing a penalty up to £100 encourage passengers to turn down volume or use headphones?

a) The penalty decreases the marginal social benefit of loud music.

b) The penalty irritates lovers of loud music so they increase the volume and refuse to use headphones.

c) The penalty makes passengers bear the external cost of loud music.

d) Passengers will continue to play loud music.

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