Why Do Private Markets Fail to Account for Externalities

question 121

Multiple Choice

Why do private markets fail to account for externalities

• A)The effect of externalities are difficult to measure in private markets.
• B)Sellers include costs associated with externalities in the price of their products.
• C)Decision makers in the market fail to take into account the external effects of their behaviour.
• D)The government can easily correct any adverse effect on the market that externalities may cause.

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Definitions:

Payment Schemes

Systems or methods used to transfer money between entities, often involving structured processes and standards for executing transactions.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Exercise Equipment

Tools and machines designed for physical activities that improve fitness, such as treadmills, weights, and stationary bikes, used in both home and commercial gyms.

Loan

Borrowed money that is expected to be paid back in the future under predetermined terms.