When a Market Is Characterized by an Externality, the Government

question 392

Multiple Choice

When a market is characterized by an externality, the government

• A)can correct the market failure only in the case of positive externalities.
• B)can correct the market failure only in the case of negative externalities.
• C)can correct the market failure in the case of both positive and negative externalities by inducing market participants to internalize the externality.
• D)cannot correct for externalities due to the existence of patents.

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Definitions:

Herring

A type of fish that is widely used for food and is important in many cultural dishes.

Opportunity Cost

The financial sacrifice of the next preferable alternative when choosing.

Cell Phones

Electronic devices used for mobile telecommunications over a cellular network of specialized base stations.

Herring

A type of fish found in both the Atlantic and Pacific Oceans, commonly used for food.