If an externality is present in a market,economic efficiency may be enhanced by
A) government intervention.
B) increased competition.
C) better informed market participants.
D) weaker property rights.

Question

Quizplus · Accepted Answer

Government intervention can correct externalities by implementing policies such as taxes or subsidies. These policies can internalize the externality and provide the right incentives for firms and individuals to take into account the social costs or benefits of their actions. Increased competition, better informed market participants, and weaker property rights may not necessarily address the externality or lead to economic efficiency.

If an Externality Is Present in a Market,economic Efficiency May