Suppose that in the production of peanut butter, Peanuts 'R' Us discards broken peanut shells onto an adjacent recreational area.This will most likely lead to the market failure of:
A) external cost.
B) deregulation.
C) imperfect information.
D) special interest groups.

Question

Quizplus · Accepted Answer

The discarding of broken peanut shells onto an adjacent recreational area creates a negative effect on individuals who use the area, as they are exposed to a cost (inconvenience, health hazards, etc.) that is not reflected in the price of peanut butter. This is an example of a negative externality, which causes market failure and necessitates government intervention in the form of regulation or taxation to internalize the cost. Choices B, C, and D do not accurately reflect the situation presented.

Suppose That in the Production of Peanut Butter, Peanuts 'R