When There Is an Externality in a Market

question 214

Multiple Choice

When there is an externality in a market,

• A)the externality will move the market to an economically efficient equilibrium.
• B)the externality will cause the market price to be less than or greater than the equilibrium price.
• C)the government should use price controls to enable the market to reach equilibrium.
• D)government intervention may increase economic efficiency.

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Definitions:

Slipping Clutch

A condition where the clutch fails to engage fully, resulting in a loss of power transmission from the engine to the drivetrain, often accompanied by a burning smell.

Clutch Installation Pilot Shaft

A tool used during the installation of a clutch to align the clutch disc with the pressure plate and the pilot bearing, ensuring proper engagement and operation.

Clutch Friction Disc Splines

The teeth on the hub of a clutch disc that mate with the input shaft splines of a transmission, allowing torque transfer.

Transmission Input Shaft Splines

Grooves or teeth on the input shaft of a transmission that mesh with corresponding parts to transfer power from the engine to the transmission.