Market failures occur whenever
A) private returns may be greater than social returns.
B) social returns may be greater than private returns.
C) the free market produces less than what is socially optimal.
D) monopolies exist in a market.
E) All of the above.
E
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Refer to the production possibilities curves below. Curve (a) is the current curve for the economy. Focusing on curve (a), point N suggests that the economy currently produces:
A. More goods for the future than at point P
B. Less goods for the future than at point P
C. Less goods for the present than at point P
D. A combination of output that is less than its potential
Correcting a market with an externality through taxation is ________ correcting it through a quota.
A. less efficient than B. more efficient than C. just as efficient as D. Any of these statements could be true depending on whether the tax is imposed on the buyer or seller.