Markets Fail When Externalities Are Present

question 40

Multiple Choice

Markets fail when externalities are present

• A) because all of the costs and benefits of producing a good are reflected in the market price.
• B) because some of the costs and benefits of producing a good are not reflected in the market price.
• C) only if they are negative; positive externalities are not market failures.
• D) because profits are not maximized.
• E) if the positive externalities are less than the negative externalities.

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