When dealing with externalities,how can we correct market failure
A)In the case of positive externalities, the market can correct it, but in the case of negative externalities, government regulation is necessary.
B)In the case of negative externalities, the market can correct it, but in the case of positive externalities, government regulation is necessary
C)In the case of both positive and negative externalities, government regulation is often necessary to induce market participants to internalize the externality.
D)In the case of both positive and negative externalities, market can correct all market failures.

Question

Quizplus · Accepted Answer

Both positive and negative externalities can result in market failures, as the cost or benefit of an activity is not fully borne by the individuals or firms engaged in that activity. Government regulation can help to internalize the externality by imposing taxes or subsidies on the activity to reflect its true social costs or benefits.

When Dealing with Externalities,how Can We Correct Market Failure