High School Economics Quiz
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GOVERNMENT AND THE ECONOMY
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Which of the following statements provides the most accurate conceptual explanation for why externalities cause market outcomes to be inefficient?
A
Externalities ensure that the benefits of an action are received by one party while the costs are borne by another.
B
Externalities prevent markets from reaching equilibrium, leaving a persistent surplus or shortage of the good.
C
Externalities introduce a wedge between the private and social costs or benefits of an action.
D
Externalities convert private goods into public goods, making it impossible for firms to charge a price for them.
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