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:

Horizontal Line Test

A method used to determine if a function is injective or one-to-one, based on whether any horizontal line intersects the graph more than once.

One-to-One

A function for which every element of the range of the function corresponds to exactly one element of the domain.

Inverse Function

A function that reverses the operation of a given function, swapping the roles of its inputs and outputs.

Domain

All the x-values that can be input into a function where it is specifically defined.