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.

---

Definitions:

Short Run

This term refers to a timeframe in economic analysis where at least one factor of production is considered fixed, distinguishing short-term operational decisions from long-term planning.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor, differing from fixed costs which remain constant regardless of output.

Total Revenue

Total Revenue is the entire amount of income generated by the sale of goods or services related to a company's primary operations.

Abba Lerner

An economist known for his contributions to Keynesian economics, particularly his work on the theory of functional finance.