Private Markets Fail to Account for Externalities Because

question 155

Multiple Choice

Private markets fail to account for externalities because

• A)externalities don't occur in private markets.
• B)sellers include costs associated with externalities in the price of their product.
• C)decisionmakers in the market fail to include the costs of their behavior to third parties.
• D)the government cannot easily estimate the optimal quantity of pollution.

---

Definitions:

International Fisher Effect

A theory stating that differences in nominal interest rates between two countries are directly proportional to changes in the exchange rate over the same period.

Nominal Rates

Interest rates or rates of return that have not been adjusted for inflation.

Note Issuance Facility

A financial arrangement that allows a borrower to issue short-term debt securities as needed, up to a predetermined limit.

Eurobond Agreement

An international bond that is denominated in a currency not native to the country where it is issued, often used by companies and governments to raise capital.