Which Example Illustrates a Policy Solution to Inefficiency in the Free

question 166

Multiple Choice

Which example illustrates a policy solution to inefficiency in the free market caused by the stated externality?

• A)The city government imposes rent control.The externality is that housing's quantity demanded exceeds the quantity supplied at the current price.
• B)The federal government imposes a minimum wage.The externality is that firms pay too little to their workers.
• C)The government offers free childhood immunizations.The externality is that an immunized child cannot transmit disease to others.
• D)The federal government provides national defense.The externality is that people can't be excluded from national defense,even if they don't pay for it.

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Definitions:

Accounts Receivable

Funds that customers owe to a company for products or services provided but not yet compensated for.

Accounts Payable

Money owed by a company to its creditors for goods or services that have been received but not yet paid for.

Cash

Money in the form of coins or banknotes, especially that which is available for transactions and accounting purposes.

Office Supplies

Items used in offices by businesses and other organizations for writing, printing, filing, and performing other tasks.