If Only a Few People Are Affected by an Externality

question 306

Multiple Choice

If only a few people are affected by an externality, then it is likely that

• A) corrective taxes will provide the most efficient solution to the externality.
• B) command-and-control regulation will provide the most efficient solution to the externality.
• C) a private solution to the inefficiency will occur.
• D) a private solution will be very difficult to negotiate.

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Definitions:

Employees

Individuals hired by a firm to perform work in exchange for compensation, under the firm's control and direction.

Corporate Mergers

The amalgamation of two or more companies to form a single entity, aimed at enhancing market share or efficiency.

Failure Rate

The frequency at which an expected outcome does not occur, often used in the context of product failures or business project failures.

Cost Savings

The reduction in expenses achieved through efficiency improvements, negotiation, or elimination of unnecessary expenses.