A Rationale for Intervention Is a Reason Why ______________,Guided Only

question 17

Multiple Choice

A rationale for intervention is a reason why ______________,guided only by markets and private institutions,might make ____________ choices.This means that,compared to some societal ideal,they choose to __________________ of some activity.

• A) Private actors; socially suboptimal; do either too little or too much
• B) Public actors; socially optimal; do too much
• C) Private actors; privately suboptimal; do too little
• D) Public actors; socially suboptimal; do too little

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Definitions:

Negative Externality

A cost that affects a party who did not choose to incur that cost, often arising from production or consumption of goods and services.

Socially Optimal Quantity

The level of production or consumption that maximizes social welfare, considering all costs and benefits to society.

Equilibrium Quantity

The quantity of goods or services bought and sold at the equilibrium price, where demand equals supply.

Negative Externality

occurs when the production or consumption of a good or service imposes costs on third parties not directly involved in the transaction.