When the Free Market Produces Less Than the Socially Optimal

question 181

Multiple Choice

When the free market produces less than the socially optimal quantity of a good,

• A)negative externalities must be present
• B)marginal social cost must exceed marginal private cost
• C)marginal private benefit must exceed marginal social benefit
• D)the government should tax production of the good
• E)there has been a market failure

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Definitions:

Agricultural Revolution

A period of significant technological, social, and economic changes in agriculture, leading to increased production and efficiency.

Desert

A barren area of landscape where little precipitation occurs, thus supporting only sparse vegetation and a limited range of animals due to harsh living conditions.

Information-Globalization Revolution

A period marked by the rapid spread of information technologies and the global integration of economies, cultures, and politics.

Homogenizing

The process of making something uniform or similar by blending disparate elements.