When Negative Externalities Are Present in a Market

question 214

Multiple Choice

When negative externalities are present in a market

• A)private costs will be greater than social costs.
• B)social costs will be greater than private costs.
• C)only government regulation will solve the problem.
• D)the market will not be able to reach any equilibrium.

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Definitions:

Interest Rate

The cost incurred by a borrower, calculated as a percentage of the principal, for borrowing assets from a lender.

Loanable Funds

The money available in the financial system for lending to individuals and businesses, depending on the savings rate and monetary policies.

Equilibrium Interest Rate

The interest rate at which the quantity of money demanded equals the quantity of money supplied, balancing the savings and the demands for loans.

Interest Rates

The cost of borrowing money or the reward for saving, often expressed as a percentage of the principal amount.