The main form of market failure causing environmental damage is
A)moral hazards
B)imperfect information
C)externalities
D)economic growth

Question

Quizplus · Accepted Answer

Externalities refer to a situation where the actions of one economic agent have an effect on the well-being of another agent, without being reflected in prices. In the case of environmental damage, for example, a firm may emit pollutants into the air or water, causing harm to individuals or communities downwind or downstream from their operations. These costs are not typically borne by the firm and are not factored into the price of the goods or services they sell, creating a market failure that leads to overconsumption and underinvestment in environmentally friendly technologies.

The Main Form of Market Failure Causing Environmental Damage Is