Why are externalities considered a cause of market failure? O Because they lead to suboptimal outcomes. O Because decision makers become overly concerned about the impact of their actions on bystanders. O Because they always cause a net loss in welfare. O Because they make markets so competitive that profits disappear.

Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter5: Difficult Cases For The Market And The Role Of Government
Section: Chapter Questions
Problem 10CQ
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Am. 112.

Why are externalities considered a cause of market failure?
O Because they lead to suboptimal outcomes.
O Because decision makers become overly concerned about the impact of their actions on bystanders.
O Because they always cause a net loss in welfare.
O Because they make markets so competitive that profits disappear.
Transcribed Image Text:Why are externalities considered a cause of market failure? O Because they lead to suboptimal outcomes. O Because decision makers become overly concerned about the impact of their actions on bystanders. O Because they always cause a net loss in welfare. O Because they make markets so competitive that profits disappear.
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