If It's Possible to Eliminate the Problems Created by Externalities

question 119

Multiple Choice

If it's possible to eliminate the problems created by externalities, why do they persist?

• A)It can be difficult to coordinate the millions of market participants.
• B)Creating a more efficient solution does not guarantee a fair distribution of surplus.
• C)Solutions can be diffuse, complex, and hard to control.
• D)All of these are true.

---

Definitions:

Derivative Financial Instrument

A financial contract whose value is derived from the performance of assets, interest rates, currency exchange rates, or indices.

Forward Exchange Contract

A financial agreement to exchange a specified amount of one currency for another currency at a future date and at a predetermined exchange rate.

Futures Contract

A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, often used as a financial instrument for hedging or speculation.

Option Contract

A contract which gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a specified time.