When Does a Free Market Fail

question 97

Multiple Choice

When does a free market fail?

• A)When there is an external effect in either production, consumption, or both
• B)When there is government intervention
• C)When firms that produce goods which create positive externalities go bankrupt
• D)When firms that produce goods which create negative externalities earn high profits

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Definitions:

Issue Price

This refers to the price at which new securities are issued to the public or to investors by the issuing company.

Par Value

The nominal or face value of a stock or bond, as stated by the issuing corporation.

Dividends

Payments made by a corporation to its shareholders, typically from profits, as a return on investment.

Corporate Income

The total income of a corporation derived from its operations and investments, subject to corporate taxes.