The impact of competition during the presence of negative externalities.

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Chapter 14, Problem 2SQ

To determine

The impact of competition during the presence of negative externalities.

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Why is a price change NOT an externality? Select one: a. A price change affects bystanders, not market participants. b. A price change does NOT change total costs or benefits, it only changes who buys the good. c. A change in price changes the marginal benefit of a good but does NOT change who buys and sells the good. d. A price change redistributes costs but not benefits.

1.A good with a negative externality is an example of a market failure because * a.The price does not fluctuate with supply and demand. b.The price of the product does not reflect the social cost. c.A good can be consumed by many people without them having to pay for it. d.The market is producing a good very few people want. 2.A good with a negative externality is an example of a market failure because * a.The price does not fluctuate with supply and demand. b.The price of the product does not reflect the social cost. c.A good can be consumed by many people without them having to pay for it. d.The market is producing a good very few people want.

An externality is Select one: a. the uncompensated impact of one person's actions on the well-being of a bystander. b. a market equilibrium tax. c. the costs that parties incur in the process of agreeing and following through on a bargain. d. the proposition that private parties can bargain without cost over the allocation of resources.