If Only a Few People Are Affected by an Externality

question 306

Multiple Choice

If only a few people are affected by an externality, then it is likely that

• A) corrective taxes will provide the most efficient solution to the externality.
• B) command-and-control regulation will provide the most efficient solution to the externality.
• C) a private solution to the inefficiency will occur.
• D) a private solution will be very difficult to negotiate.

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Definitions:

Disinhibition

A decrease in restraint over one's actions or emotions, often leading to impulsive or inappropriate behavior.

Dishabituation

The restoration of a response that has undergone habituation, typically due to the presentation of a novel stimulus.

Neurotransmitter Release

The process by which neurotransmitters are secreted from neural synapses, facilitating communication between neurons.

Dishabituation

is the renewed response to a stimulus after habituation has occurred, typically due to a novel stimulus interrupting the habituation process.