Why Do Private Markets Fail to Reach a Socially Optimal

question 192

Multiple Choice

Why do private markets fail to reach a socially optimal level when negative externalities are present

• A)Private benefit exceeds social benefit at the private market solution.
• B)Private costs exceed social costs at the private market solution.
• C)Social costs exceed private costs at the private market solution.
• D)Social benefit exceeds private benefit at the private market solution.

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Definitions:

Numerically Measurable

Quantifiable or able to be expressed in numerical terms and measured.

Convex

A shape where a line drawn between any two points on the structure will lie outside it, often used in economics to describe preference curves.

Marginal Rates

Rates of tax or charges that apply to the next unit of income or consumption, often increasing with the amount subject to the rate.