When externalities are present in a market,how is the well-being of market participants and market bystanders affected by government policies
A)Market participants are directly affected, and market bystanders are indirectly affected.
B)Market participants and market bystanders are both directly affected.
C)Market participants and market bystanders are both indirectly affected.
D)Market participants are indirectly affected, and market bystanders are directly affected.

Question

Quizplus · Accepted Answer

Government policies that address externalities aim to internalize the costs or benefits of the external effects on market participants. As a result, market participants are directly affected by these policies. However, market bystanders may also be indirectly affected by the policies, as they may face changes in the availability, price, or quality of goods or services due to the actions taken by the government to address the externality.

When Externalities Are Present in a Market,how Is the Well-Being