An External Market

question 11

Multiple Choice

An external market

• A)should always replace internal markets.
• B)have problems that internal markets do not.
• C)should be used to discipline the internal market.
• D)fewer economies of scope.

Recognize the role of government intervention in correcting market failures due to externalities and asymmetric information.

Analyze how policies can address global warming and pollution through market-based approaches like cap-and-trade systems.

Appreciate the impact of asymmetric information on market transactions and the quality of goods and services.

Examine the benefits and limitations of government actions to correct market failures, including regulating information and licensing.

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Definitions:

Merchant

An individual or business entity engaged in the trade of goods, services, or both to consumers, primarily for earning a profit.

Original Owner

Refers to the first owner or possessor of an item or property after it was created or came into being.

Shipment Contract

An agreement in which the seller is obligated to send goods to a buyer, but the risk of loss passes to the buyer when the goods are delivered to the carrier.

Title Passes

The point at which ownership of property is transferred from one party to another according to the terms of a contract.