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:

Required Rate of Return

It is the minimum return an investor expects to achieve by investing in a particular security or portfolio, factoring in various risks and the time value of money.

Share of Stock

A share of stock represents ownership in a corporation, giving the shareholder a claim to a part of the company’s assets and earnings.

Dividend Growth Model

A method used to value a company's stock by assuming that dividends will grow at a constant rate in perpetuity.

Publicly Traded Stock

Stocks that are listed on a stock exchange, allowing investors to buy and sell shares to the general public.