Markets Tend to Overproduce Goods That Generate External Costs

question 58

True/False

Markets tend to overproduce goods that generate external costs.

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time.

Inoculation

A way of making people resistant to persuasion. By providing them with a diluted counter-argument, they can build up effective refutations to a later, stronger argument.

Reactance

Brehm’s theory that people try to protect their freedom to act. When they perceive that this freedom has been curtailed, they will act to regain it.

Inoculation Effect

A social psychology theory that suggests exposure to a weakened form of an argument increases later resistance to that argument.