The Market Can Deal with an Externality Over Time If

question 98

Multiple Choice

The market can deal with an externality over time if

• A) the external costs and benefits are not internalized.
• B) private property rights are well defined.
• C) government intervention corrects the external costs and benefits.
• D) public interest group(s) force the externality to be corrected.
• E) the socially optimal amount is produced.

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Definitions:

Perfectly Competitive

A market structure characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information, resulting in firms being price takers.

Price

The amount of money required to purchase a good or service; the value that must be exchanged to acquire a specific product.

Short-run Industry Supply

The total quantity of goods that producers in an industry are willing and able to sell at different prices in a short period, without changing production capacity.

Perfectly Competitive Market

A theoretical market structure characterized by infinite buyers and sellers, homogenous products, and no barriers to entry or exit.