Why Do Markets Often Fail at Environmental Protection

question 52

Multiple Choice

Why do markets often fail at environmental protection?

• A) They are focused on making profits for their investors.
• B) They should bear no responsibility for protecting the environment.
• C) There is no profit to be made in protecting the environment.
• D) There is little agreement as to what environmental protection involves.
• E) They do not assign a monetary value to the benefits provided by natural capital.

---

Definitions:

Supply Equation

A mathematical formula used to describe the relationship between the price of a good or service and the quantity supplied, holding other factors constant.

Price Floor

A government- or authority-imposed minimum price that can legally be charged for a good or service.

Shortage/Surplus

A market condition where the quantity demanded exceeds supply (shortage) or supply exceeds demand (surplus), affecting prices and availability.

Demand Equation

A mathematical expression that describes the relationship between the quantity demanded of a good and its price, along with other factors like income and price of related goods.