All remedies for externalities share the goal of
A)moving the allocation of resources toward the market equilibrium.
B)moving the allocation of resources toward the socially optimal equilibrium.
C)increasing the allocation of resources.
D)decreasing the allocation of resources.

Question

Quizplus · Accepted Answer

Remedies for externalities aim to correct the market failure that results from the divergence between private and social costs or benefits. The socially optimal equilibrium is where marginal social cost equals marginal social benefit. Thus, all remedies aim to move the allocation of resources toward the socially optimal equilibrium rather than the market equilibrium (choice A). Increasing or decreasing allocation of resources (choices C and D) is not necessarily the goal of remedies for externalities, but rather achieving an efficient allocation of resources.

All Remedies for Externalities Share the Goal of