A negative externality is an example of market failure. The root of the problem lies in the definition and enforcement of property rights. Explain

What will be an ideal response?


If harmed parties do not have rights or have rights that are not enforced or weakly enforced, producers can make choices that impose costs on others and do not have to bear the full cost of their actions. This creates a discrepancy between the private cost of production and the social cost of production, the true cost of production being the social cost. Since the private cost is less than the social cost, firms will produce more than the economically efficient output level, resulting in a market failure. (Students can also explain using positive externalities.)

Economics

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Of the $3 per pizza tax illustrated in the above figure, the

A) consumers pay $2 of the $3 per pizza tax. B) sellers pay $1 of the $3 per pizza tax. C) government collects $120 thousand in revenue from the pizza tax. D) All of the above answers are correct.

Economics

Defenders of advertising argue that it:

a. informs buyers and broadens the market for goods. b. enhances economic efficiency by lowering prices. c. enables small firms to compete more effectively with large ones. d. all of these.

Economics

Workers with a particular skill are represented by

A. Craft unions. B. Industrial unions. C. Market unions. D. Skill unions.

Economics

A monopoly's goal using price discrimination is to increase

A) total revenue. B) marginal revenue. C) total profit. D) the per unit profit.

Economics