When Dealing with Consumption Externalities, Government Can Potentially Correct the Market

question 68

Multiple Choice

When dealing with consumption externalities, government can potentially correct the market failure:

• A)only in the case of positive consumption externalities
• B)only in the case of negative consumption externalities
• C)in both the positive and negative cases by inducing market participants to internalise the externality
• D)in neither the positive or negative cases because governments can only correct production externalities

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Definitions:

Liquidated

The process of converting assets into cash or other forms of payment, often used in bankruptcy proceedings.

Interest Income

Earnings received from deposit accounts or investments such as bonds, loans where one lends money to someone else in exchange for a return of interest.

Currency Notes

Paper money issued by a country's central bank or government as legal tender for transactions.

Money Demand Curve

A graph showing the relationship between the quantity of money demanded and the interest rate.