The Problem with Externalities Is Essentially One of

question 31

Multiple Choice

The problem with externalities is essentially one of

• A)a discrepancy between private and social costs.
• B)asymmetric information.
• C)the inability of a firm in an industry characterized by increasing returns to scale to make positive profits if it sets price equal to marginal cost.
• D)a failure of the market to generate socially valued outcomes.
• E)the failure of the market to solve social problems.

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Definitions:

Heterogeneous Population

A diverse group of individuals differing in various attributes such as age, gender, ethnicity, or socioeconomic status.

Alcoholism

A chronic disease characterized by uncontrolled drinking and a preoccupation with alcohol.

Implicit Marginal Tax Rate

The rate at which additional income is taxed, including the loss of government benefits or subsidies as income rises.

Food Stamp Benefits

Government-provided assistance to individuals and families with low income to help them afford groceries, officially known as the Supplemental Nutrition Assistance Program (SNAP).