Altering incentives so that people take account of the external effects of their actions（）
A. is called internalizing the externality
B. can be done by imposing a corrective tax
C. is the role of government in markets with externalities
D. all the answers are correct
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The Coase theorem suggests that private markets may not be able to solve the problem of externalities（）
A. if the government does not become involved in the process
B. when the number of interested parties is large and bargaining costs are high
C. if the firm in the market is a monopoly
D. if some people benefit from the externality
Markets are often inefficient when negative externalities are present because（）
A. private costs exceed social costs at the private market solution
B. externalities cannot be corrected without government regulation
C. social costs exceed private costs at the private market solution
D. production externalities lead to consumption externalities
The provision of a public good generates a（）
A. positive externality, as does the use of a common resource
B. positive externality and the use of a common resource generates a negative externality
C. negative externality, as does the use of a common resource
D. negative externality and the use of a common resource generates a positive externality
In a market economy, government intervention（）
A. will always improve market outcomes
B. reduces efficiency in the presence of externalities
C. may improve market outcomes in the presence of externalities
D. is necessary to control individual greed
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