Market Failures Occur Whenever

question 33

Multiple Choice

Market failures occur whenever

• A)private returns may be greater than social returns.
• B)social returns may be greater than private returns.
• C)the free market produces less than what is socially optimal.
• D)monopolies exist in a market.
• E)All of the above.

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Definitions:

Marginal Cost Function

A mathematical expression that describes how the cost of producing one additional unit of a good or service varies with the quantity produced.

Reservation Price

The maximum amount a consumer is willing to pay for a good or service.

Elasticity of Demand

An index that determines the sensitivity of consumer demand for a product to its price change, by comparing the percent change in the amount of the good demanded with the percent change in its price.

Business Users

Individuals or entities that use goods or services for the purpose of running a business, as opposed to personal or recreational use.