Asked by
Mikayla Mapps
on Dec 11, 2024Verified
Consider two goods--one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce
A) too much of both goods.
B) too little of both goods.
C) too much of the good that generates external benefits and too little of the good that generates external costs.
D) too little of the good that generates external benefits and too much of the good that generates external costs.
External Benefits
Benefits resulting from a transaction that affect parties not directly involved in the transaction, often leading to positive outcomes for society.
External Costs
Costs of a transaction or activity that affect third parties who did not choose to incur that cost, often seen in environmental pollution.
Competitive Market
A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product for which there are many substitutes.
- Determine the role of external costs and benefits in affecting market efficiency.
- Investigate the response of markets to external factors and its effect on optimum levels of output.
Verified Answer
MM
Learning Objectives
- Determine the role of external costs and benefits in affecting market efficiency.
- Investigate the response of markets to external factors and its effect on optimum levels of output.