Use the Following to Answer Questions

question 156

Multiple Choice

Use the following to answer questions:
Figure: Correcting for Market Failure
-(Figure: Correcting for Market Failure) There is an external cost in the market illustrated in the figure Correcting for Market Failure. If the government forces the private-sector firms to face the external cost:

• A) the supply curve shifts to the right, from S₂ to S₁.
• B) the supply curve shifts to the left, from S₁ to S₂.
• C) the supply curve is unaffected.
• D) price per unit decreases.

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Definitions:

Securities

Financial instruments that represent some form of financial value such as stocks, bonds, or options, which can be bought and sold.

"Go Public"

The process by which a privately-held company offers its shares for sale to the public for the first time, typically through an initial public offering (IPO).

Red Herring

A prospectus for the sale of a security not yet approved by the SEC. Stamped with the word preliminary in red letters.

Commerce Department

A department of the federal government dedicated to promoting economic growth, supporting business, and managing trade.