Use the following to answer question(s): Correcting for Market Failure: External Cost

-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.If the government intervenes to correct for the external cost, there will be a ________ of _______ .
A) net gain; WTUR
B) net cost; TUV
C) net gain; TUV
D) net gain; WTVR

Question

Use the following to answer question(s): Correcting for Market Failure: External Cost
 
-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.If the government intervenes to correct for the external cost, there will be a ________ of _______ .
A) net gain; WTUR 
B) net cost; TUV 
C) net gain; TUV 
D) net gain; WTVR

Quizplus · Accepted Answer

When the government intervenes to correct for external cost, a net gain of TUV (total social surplus) will be achieved. This is because correcting for external costs will reduce the overall cost of production and consumption, leading to a more efficient allocation of resources and a higher total social surplus.

Use the Following to Answer Question(s): Correcting for Market Failure