ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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social costs equal private costs at the private market solution.
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private costs exceed social costs at the private market solution.
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social costs exceed private costs at the private market solution.
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they internalize externalities.
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Detailed explanation-1: -Since people can enjoy the good without paying for it, the private market produces less of the good or service than is socially optimal. Being nonrival, more than one person can enjoy the good.
Detailed explanation-2: -private goods A negative externality exists when the production or consumption of a product results in a cost to a third party. Air and noise pollution are commonly cited examples of negative externalities. When negative externalities are present, private markets will overproduce because the costs of production for…
Detailed explanation-3: -Answer and Explanation: Private markets fail to account for externalities because they have no incentive to account for them. The incentives that influence businesses and consumers are financial in nature.
Detailed explanation-4: -A private market with negative externalities is inefficient since negative or cost externalities make the social cost surpass the supply curve or the demand curve exceeds the social benefit. Inefficiency arises in negative externalities since the social optimal is less than the market’s output.