When Negative Externalities Are Involved, the Market Is Said to

question 135

Multiple Choice

When negative externalities are involved, the market is said to

• A)fail, because it underproduces the good connected with the negative externality.
• B)fail, because it overproduces the good connected with the negative externality.
• C)succeed, because it produces the socially optimal quantity of the good connected with the negative externality.
• D)be "in optimum," because the equilibrium fully adjusts for the negative externality.

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Definitions:

Partnership Interest

Ownership share or participation in a partnership that usually entitles the holder to a proportion of the partnership's profits and assets.

Capital Contributions

The funds or assets initially invested in a business or partnership by its owners or partners.

Ratio

A relationship in numbers expressing the frequency with which one value encompasses or is encompassed by another.

Lowest Terms

The simplest form of a fraction when both the numerator and denominator cannot be any smaller while still being whole numbers.