Socially inefficient outcomes may occur in markets where there are:
A)negative externalities present.
B)asymmetric information problems present.
C)positive externalities present.
D)any of the above.

Question

Socially inefficient outcomes may occur in markets where there are:
A)​negative externalities present.
B)​asymmetric information problems present.
C)​positive externalities present.
D)​any of the above.

Quizplus · Accepted Answer

Socially inefficient outcomes can arise in markets due to negative externalities, asymmetric information problems, or positive externalities. In the case of negative externalities, such as pollution, the costs of production or consumption are not fully borne by the parties involved, leading to overproduction and a socially inefficient outcome. In the case of asymmetric information, such as when buyers and sellers have different levels of information about the quality of a product, there may be adverse selection or moral hazard problems that lead to an inefficient allocation of resources. Finally, in the case of positive externalities, such as education or vaccination, the benefits are not fully captured by the parties involved, leading to underproduction and a socially inefficient outcome. Therefore, all of the above factors can contribute to socially inefficient outcomes in markets.

Socially Inefficient Outcomes May Occur in Markets Where There Are