Markets Fail When Externalities Are Present

question 40

Multiple Choice

Markets fail when externalities are present

• A) because all of the costs and benefits of producing a good are reflected in the market price.
• B) because some of the costs and benefits of producing a good are not reflected in the market price.
• C) only if they are negative; positive externalities are not market failures.
• D) because profits are not maximized.
• E) if the positive externalities are less than the negative externalities.

---

Definitions:

Standardization

The process of developing and implementing technical standards to make a process or product more consistent and efficient.

Task Study

The examination and analysis of how tasks are accomplished within an organization, often aiming to enhance efficiency and productivity.

Theory Y

is a management approach that assumes employees are self-motivated, enjoy work, and will seek and accept responsibility and challenges.

Douglas McGregor

An influential social psychologist who proposed Theory X and Theory Y to describe different attitudes towards workforce motivation and management.