Externalities

question 28

Multiple Choice

Externalities:

• A) are not reflected in market prices, so they can be a source of economic inefficiency.
• B) do become reflected in market prices, so they can be a source of economic inefficiency.
• C) are not reflected in market prices, so they do not adversely affect economic efficiency.
• D) do become reflected in market prices, so they do not adversely affect economic efficiency.
• E) may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.

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Definitions:

Lawn-mowing

The act of cutting the grass of a lawn to maintain a specified height and neat appearance.

Variable Costs

Expenses that change in proportion to the activity or volume of goods or services produced.

Snow-clearing

Snow-clearing involves the removal of snow from roads, sidewalks, and other public areas to ensure safety and accessibility during winter conditions.

Perfectly Competitive

Refers to a market scenario where an unlimited number of buyers and sellers operate, and the single product offered is homogenous, making no single entity able to influence the market price.