The Basic Reason That a Competitive Unregulated Market Produces an Inefficient

question 12

Multiple Choice

The basic reason that a competitive unregulated market produces an inefficient amount of a good with an external cost is because

• A) producers cannot measure marginal social cost.
• B) producers do not pay the external cost.
• C) the general public does not care about external costs.
• D) external costs are not a political issue.
• E) the external cost is paid by consumers rather than producers.

---

Definitions:

Economic Incentives

Financial motivations designed to encourage or discourage certain behaviors among individuals or organizations.

Rational

Relating to, based on, or capable of reasoning that is coherent and consistent, often used to describe decisions or thought processes.

Classical Approach

A management theory that emphasizes a structured form of organization, focused on efficiency, and based on principles of planning, organizing, commanding, coordinating, and controlling.

Bureaucracy

A system of administration characterized by strict policies, procedures, and hierarchy, often within large organizations.