ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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+ 4.0
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-4.0
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+ 0.25
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-0.25
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Detailed explanation-1: -In the case of a positive externality, the third party is obtaining benefits from the exchange between a buyer and a seller, but they are not paying for these benefits. If this is the case, markets tend to under-produce output because suppliers do not consider the additional benefits to others.
Detailed explanation-2: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.
Detailed explanation-3: -There are five major elements that, if lacking or weak, can cause a market failure. The five major elements include: competition, information, mobility of resources, externalities, and distribution of public goods.
Detailed explanation-4: -When negative externalities are present, it means the producer does not bear all costs, which results in excess production. With positive externalities, the buyer does not get all the benefits of the good, resulting in decreased production.