Since Externalities Tend to Keep Markets from Reaching a Socially

question 162

Multiple Choice

Since externalities tend to keep markets from reaching a socially optimal equilibrium,when is government action needed

• A)It is always needed, because private solutions can never be attained.
• B)It is needed when private solutions fail to arise.
• C)It will be needed only to correct for positive externalities.
• D)It will be needed only to compensate consumers.

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Definitions:

Credit Card

A card issued by a financial institution that allows the cardholder to borrow funds with which to pay for goods and services with the promise to repay these funds, plus any agreed charges.

Over-optimism

The tendency to overestimate the likelihood of positive outcomes in the future.

Consumer

An individual or group that purchases goods or services for personal use.

Perceived Budget Line

A graphical representation of all possible combinations of goods that a consumer can purchase with a given budget, based on their perception of available resources.