When Negative Externalities Are Present in a Market

question 347

Multiple Choice

When negative externalities are present in a market,

• A)producers will be affected but consumers will not.
• B)producers will supply too much of the product.
• C)demand will be too high.
• D)the market will still maximize total benefits.

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.

Contract Rate

The interest rate to be paid on the face amount of a bond as specified in the bond indenture.

Premium

An amount paid in addition to the standard price or cost, often in exchange for a service, insurance coverage, or higher-quality good.

Bondholders

Individuals or entities that hold debt securities issued by corporations or governmental bodies, expecting interest payments and the return of principal.