Why Does Market Failure with Common Resources Occur

question 7

Multiple Choice

Why does market failure with common resources occur

• A)The government imposes a negative externality on everyone's consumption of the resource.
• B)Society is unable to value the social loss that results from individual consumption.
• C)Consumption can be privately beneficial even when it is socially undesirable.
• D)Consumption of the common resources creates positive externalities.

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Definitions:

Par Value

A nominal value assigned to a share of stock in the charter of a corporation, which does not necessarily reflect its market value.

Common Stock

Equity securities representing ownership in a corporation, providing voting rights, and a dividend claim on earnings.

Cumulative Nonparticipating Preferred Stock

Preferred stock that accumulates unpaid dividends, which must be paid out before dividends can be distributed to common stockholders, but does not participate beyond the fixed dividend.

Cash Dividends

A redistributive payment of a portion of a company's earnings, made in cash, to its shareholders.