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Economics
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7. Because externalities represent a case where markets no longer consider all social costs, but only some of them, economists commonly refer to externalities as an example of

a. state failure

b. society failure

c. market failure

d. none of the above

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Microeconomics
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Defining Negative Externality
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Raushan Raj
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28 Oct 2020

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Related questions

8. In case of market failure, the private market fails to achieve efficient output because:

a. firms do not account for all costs incurred in the production of output

b. consumers do not account for all benefits obtained (a positive externality).

c. both of the above

d. none of the above

In an article in the agriculture magazine Choices, Oregon State University economist JunJie Wu made the following observation about the conversion of farmland to urban development: 
 
Land use provides many economic and social benefits but often comes at a substantial cost to the environment. Although most economic costs are figured into land-use decisions, most environmental externalities are not. These environmental 'externalities" cause a divergence between private and social costs for some land uses, leading to an inefficient land allocation. For example, developers may not bear all the environmental and infrastructural costs generated by their projects. Such market failures provide a justification for private conservation efforts and public land use planning and regulation. 
 
Source: JunJie Wu, "Land Use Changes: Economic, Social, and Environmental Impacts," Choices, Vol. 23, No. 4, Fourth Quarter 2008, pp. 6-10. 
 
By market failure, the author means:
 
(i) benefiting from a good without paying for it. 
(ii) a situation that occurs when one person's consumption of a unit of a good means no one else can consume it. 
(iii) a situation in which the market fails to produce an efficient level of output. 
(iv) a situation in which a benefit is present that affects someone who is not directly involved in the consumption of a good or service. 
(v) the tendency for a common resource to be underused.

739. You are given the following statements about negative externalities associated with the production of a particular commodity. Which of them are generally truc? I) The marginal social cost of an increase in output exceeds the marginal private cost. II) Private markets will provide less output of this particular commodity than is socially desirable. III) Private firms will concentrate on private costs and ignore the cost burden they impose on others. (A) I only (B) II only (C) III only (D) I and II ((E) I and III (F) II and III (G) I and II and III (H) none of the above

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