In What Sense Do Externalities Cause the "Invisible Hand" of the Marketplace

question 207

Multiple Choice

In what sense do externalities cause the "invisible hand" of the marketplace to fail?

• A)Externalities lead to government intervention in markets, which exacerbates the problems associated with externalities.
• B)Externalities result in prices that are too high for many consumers to pay.
• C)Markets fail to produce the maximum total benefit to society when positive or negative externalities are present.
• D)Markets produce too little of a good when positive or negative externalities are present.

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Definitions:

Higher Wage

An increased rate of pay provided to employees, typically as a result of increased skill, productivity, or market pressures.

Labor Supply Curve

A graphical representation of the relationship between the wages on the vertical axis and the amount of labor willing to work at that wage on the horizontal axis.

Attitude Toward Work

Attitude toward work refers to an individual's overall outlook, feelings, and perceptions about their work, which can influence their job performance and satisfaction.

Substitution Effect

The alteration in buying behaviors resulting from shifts in relative prices, prompting consumers to swap costlier products with less expensive options.