The Similarity Between Markets for Common Resources and Markets with Externalities

question 7

Multiple Choice

The similarity between markets for common resources and markets with externalities is that:

• A)the price that competitive firms charge does not capture the true costs and benefits of consumption.
• B)the equilibrium quantity is too high in terms of society.
• C)government involvement is needed to reach an efficient outcome.
• D)All of these statements are true.

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Definitions:

Cost

The required expenditure or investment of resources, such as time, money, or effort, in order to obtain a product or achieve an objective.

Strong Manipulation

An experimental approach that involves significant alterations to the independent variable to observe a clear effect on the dependent variable.

Many Manipulations

A research approach that involves altering several variables independently to observe their individual or combined effects.

Costly Manipulation

A strategy or action in experiments that involves significant resources, time, or effort to influence participants' behavior or outcomes.