Use the Following to Answer Question(s): Correcting for Market Failure

question 152

Multiple Choice

Use the following to answer question(s) : Correcting for Market Failure: External Cost

-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.Economists argue that in an unregulated private market _______ is produced and the supply curve (S₁) reflects ________ cost.

• A) too little; private
• B) too much; private
• C) too much; external
• D) too little; external and private

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Definitions:

Cartel Members

Individuals or entities that form an agreement to control prices and limit competition within a market.

Collusive Agreement

A secret or illegal cooperation or conspiracy, especially between businesses, to cheat or deceive others, typically by fixing prices or rigging markets.

Market Outcome

A result of interactions between buyers and sellers in a market, determining the price and quantity of goods or services traded.

Pure Monopoly

A market structure where a single seller sells a unique product in the market and no close substitutes exist.