The pricing system has a failure built into it when externalities exist.

Name: The pricing system has a failure built into it when externalities exist.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When externalities exist, the pricing system does not take into account the full social costs or benefits of a transaction. As a result, prices can be distorted, leading to overproduction or underproduction of goods or services that may have negative or positive externalities, respectively. This is known as a market failure.

The Pricing System Has a Failure Built into It When