The Problem with Externalities Is Essentially One of

question 31

Multiple Choice

The problem with externalities is essentially one of

• A)a discrepancy between private and social costs.
• B)asymmetric information.
• C)the inability of a firm in an industry characterized by increasing returns to scale to make positive profits if it sets price equal to marginal cost.
• D)a failure of the market to generate socially valued outcomes.
• E)the failure of the market to solve social problems.

---

Definitions:

Movement Along

The change in quantity demanded or supplied of a good due to a change in its price, represented graphically by a movement along a demand or supply curve.

Slope

In mathematics and economics, the rate at which one variable changes over the change in another variable, often used in the context of supply and demand curves.

Ovals

Simple, elongated round shapes that can be geometric forms in design or natural formations.

Ratio

A quantitative relation between two amounts showing the number of times one value contains or is contained within the other.