One Reason That Private Solutions to Externalities Do Not Always

question 201

Multiple Choice

One reason that private solutions to externalities do not always work is that

• A)government intervention negates the benefits of positive externalities.
• B)some people benefit from externalities.
• C)interested parties incur costs in the bargaining process.
• D)charities are not well organized.

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Definitions:

Imperfections

Flaws, faults, or defects that prevent something from being perfect or completely correct.

Agency Costs

Expenses that arise from conflicts of interest between principals (such as shareholders) and agents (such as managers) within a corporation.

Spot Checks

Random inspections or audits conducted without prior notice to ensure compliance or verify the quality of ongoing activities.

Quality

How well a product or service fulfills or goes beyond what customers anticipate.