Why do private markets fail to account for externalities
A)The effect of externalities are difficult to measure in private markets.
B)Sellers include costs associated with externalities in the price of their products.
C)Decision makers in the market fail to take into account the external effects of their behaviour.
D)The government can easily correct any adverse effect on the market that externalities may cause.

Question

Quizplus · Accepted Answer

Private markets may fail to account for externalities because decision makers in the market fail to take into account the external effects of their behavior. This often results in an inefficient allocation of resources and outcomes that do not reflect the true social costs and benefits.

Why Do Private Markets Fail to Account for Externalities