ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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side effects passed on to a party other than the buyers and sellers in the market.
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side effects of government intervention in markets.
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external forces that cause the price of a good to be higher than it otherwise would be.
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external forces that help establish equilibrium price.
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Detailed explanation-1: -Externalities pose fundamental economic policy problems when individuals, households, and firms do not internalize the indirect costs of or the benefits from their economic transactions. The resulting wedges between social and private costs or returns lead to inefficient market outcomes.
Detailed explanation-2: -Externalities, which can be both positive or negative, can affect an individual or single entity, or it can affect society as a whole. Those impacted by externalities-usually third parties-have no control over and never choose to incur the costs or benefits.
Detailed explanation-3: -The effect of a market exchange on a third party who is outside or “external” to the exchange is called an externality. Because externalities that occur in market transactions affect other parties beyond those involved, they are sometimes called spillovers.
Detailed explanation-4: -Externalities will generally cause competitive markets to behave inefficiently from a social perspective. Externalities create a market failure-that is, a competitive market does not yield the socially efficient outcome. Education is viewed as creating an important positive externality.