If an externality is present in a market, economic efficiency may be enhanced by
A)increased competition.
B)weakening property rights.
C)better informed market participants.
D)government intervention.

Question

Quizplus · Accepted Answer

Government intervention, such as taxes or regulations, can internalize the externality and ensure that the costs or benefits of the activity are fully accounted for in the market. This can lead to a more efficient outcome as the market participants will take into account the full costs and benefits of their actions. Increased competition may not necessarily address the externality, weakening property rights could exacerbate the problem, and better-informed market participants may not be enough to address the negative impact of the externality.

If an Externality Is Present in a Market, Economic Efficiency