When a Policy Succeeds in Giving Buyers and Sellers in a Market

question 61

Multiple Choice

When a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to

• A)equalize private value and private cost.
• B)equalize private cost and external cost.
• C)externalize the actions of the buyers and sellers.
• D)internalize the externality.

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Definitions:

Commodity 1

A basic good used in commerce that is interchangeable with other goods of the same type, typically referred to when discussing market transactions.

Units of Y

A placeholder term generally referring to quantities or measurements of a variable Y.

Units of X

A measure or quantity of a particular good, product, or factor of production expressed as a discreet unit for analysis or transaction purposes.

Income

The amount of money received by an individual or entity in exchange for labor or services, from investments, or from other sources.