If an Externality Is Created by a Single Person or Firm,and

question 71

Multiple Choice

If an externality is created by a single person or firm,and affects only a single person or firm,then

• A)it is referred to as a single externality
• B)the inefficiency caused by that externality may be resolved by those two parties
• C)the externality takes the form of a side payment
• D)Pareto efficiency is guaranteed
• E)fairness dictates that the externality be removed

---

Definitions:

Surplus

The situation in which the quantity of goods exceeds the quantity demanded at the current price.

Price Ceiling

A legally established maximum price that can be charged for a good or service, usually set below the equilibrium price to make goods more affordable.

Excess Demand

A situation where the quantity demanded of a good exceeds the quantity supplied at a given price, often leading to upward pressure on prices.

Equilibrium Quantity

The quantity of goods or services at which demand equals supply, leading to a stable market condition.