Which of the following statements is not correct?
A)Private markets tend to over-produce products with negative externalities.
B)Private markets tend to under-produce products with positive externalities.
C)Private parties can bargain to efficient outcomes even in the presence of externalities.
D)Private parties are usually more successful in achieving efficient outcomes than government policies in the presence of externalities.

Question

Quizplus · Accepted Answer

This statement is not correct because there are cases where private parties cannot achieve efficient outcomes in the presence of externalities, and government policies may be necessary to correct market failures. For example, if the costs of pollution are not fully borne by the producer, the producer may continue to pollute at a level that is socially inefficient. In such cases, government policies such as taxes or regulations may be needed to internalize the externality and achieve a socially optimal outcome.

Which of the Following Statements Is Not Correct