Private Markets Fail to Reach a Socially Optimal Equilibrium When

question 37

Multiple Choice

Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the

• A)private benefit equals the social benefit at the private market solution.
• B)private cost exceeds the private benefit at the private market solution.
• C)social value exceeds the private value at the private market solution.
• D)private cost exceeds the social benefit at the private market solution.

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Definitions:

Accrued Interest

Interest accumulated but not yet paid.

Investment in Bonds

A financial strategy involving the purchase of bond securities, aiming to earn interest income and potentially benefit from bond value appreciation.

Bonds

Fixed-income investment products that represent loans made by an investor to a borrower, typically corporate or governmental, which is obligated to pay back with interest.

Comprehensive Income

The total change in equity for a reporting period other than from transactions with owners, encompassing all revenues, gains, expenses, and losses.