Private Markets Fail to Reach a Socially Optimal Level When

question 31

Multiple Choice

Private markets fail to reach a socially optimal level when positive consumption externalities are present because:

• A)private benefit equals social benefit at the private market solution
• B)private costs exceed private benefits at the private market solution
• C)social value exceeds private value at the private market solution
• D)private costs exceed social benefit at the private market solution

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Definitions:

Recapture

A process in which previously deducted or credited amounts are added back to taxable income or tax liability under certain conditions.

Short-term Capital Gain

A profit from the sale of an asset held for one year or less, taxed as ordinary income.

Long-term Capital Loss

A loss realized from the sale of a capital asset held for more than one year, which can offset capital gains and reduce taxable income.

Recognized Gains

Profits from the sale of an asset that are realized and subject to capital gains tax.