Private Markets Fail to Account for Externalities Because

question 155

Multiple Choice

Private markets fail to account for externalities because

• A)externalities don't occur in private markets.
• B)sellers include costs associated with externalities in the price of their product.
• C)decisionmakers in the market fail to include the costs of their behavior to third parties.
• D)the government cannot easily estimate the optimal quantity of pollution.

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Definitions:

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without the need for learning.

Conditioned Response

A learned response to a previously neutral stimulus that becomes elicited by the stimulus after repeated associations with an unconditioned stimulus.

Lemon Juice

A citrus liquid obtained from lemons, used primarily for its flavoring and culinary properties, notable for its high vitamin C content.

Second-Order Conditioning

A form of learning in which a neutral stimulus is first made meaningful through classical conditioning. Then, that stimulus (the CS) is paired with a new, neutral stimulus until the new stimulus also elicits the conditioned response.