Markets Are Often Inefficient When External Costs Are Present Because

question 247

Multiple Choice

Markets are often inefficient when external costs are present because:

• A) externalities cannot be corrected without government regulation.
• B) social costs exceed private costs at the private market solution.
• C) private costs exceed social costs at the private market solution.
• D) production externalities lead to consumption externalities.

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Definitions:

Product Differentiation

The practice of highlighting the unique features of a product or service to increase its appeal to a targeted market segment.

Price Wars

A competitive situation in which retailers repeatedly cut prices in order to undercut each other, often to the detriment of profit margins.

Tacit Agreements

Unspoken, unwritten mutual understandings or arrangements between parties.

Tit-For-Tat Strategy

A strategy in game theory where a player replicates the opponent's previous action, often used in conflict resolution and cooperative scenarios.