Suppose That a Negative Externality Creates $1 Billion Worth of Costs

question 75

Multiple Choice

Suppose that a negative externality creates $1 billion worth of costs to third parties. The government attacks the problem with regulations that cut the cost of the externality to $500 million but cost business and consumers $1.5 billion. This situation illustrates the idea that:

• A) regulations are an effective way to curb externalities.
• B) externalities can never be corrected.
• C) correcting market failure can result in government failure.
• D) getting rid of externalities requires a great deal of necessary sacrifice for all of us.

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Definitions:

Nonverbal Cues

Subtle signals, often unconscious, expressed through body language, facial expressions, and other nonverbal behaviors, indicating feelings or intentions.

Alert Tone

A sound or message that is designed to warn or inform individuals of important information.

Behavioral Interview

Interview in which you are asked to relate specific incidents and experiences from your past.

Behavioral Interview

A job interview technique where candidates are asked to describe past behavior as an indicator of their future performance.