Market failures sometimes lead to social regulation, particularly when the costs of a firm's behavior are not entirely borne by the firm but are passed on to other people. These failures are known as:

Question

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Negative externalities occur when a firm's actions have harmful effects on third parties, and the costs of those effects are not fully captured in the firm's private costs. As a result, social regulation may be necessary to address these external costs and ensure that the firm internalizes the full costs of its actions. The other choices listed are not accurate descriptions of market failures that may lead to social regulation.

Market Failures Sometimes Lead to Social Regulation, Particularly When the Costs