Asked by Kayli Cooper on Jun 25, 2024
Verified
Statement I: External costs are market failures,but external benefits are not.
Statement II: The U.S.government provides the legal system under which our free enterprise economy can operate.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
External Costs
Costs incurred as a result of an economic activity that affects third parties who did not choose to incur that cost.
Free Enterprise
An economic system where private businesses operate in competition, largely free of state control, with the prices of goods and services determined by the open market.
- Understand the function and influence of governmental measures on the economy, such as taxes, regulations, and supplying public goods and services.
- Comprehend the financial repercussions of external costs and benefits and their connection to market proficiency and breakdown.
Verified Answer
FE
Farouk ElabbassiJun 29, 2024
Final Answer :
B
Explanation :
Statement I is false because both external costs and external benefits are considered market failures since the market fails to account for them in the price of goods or services. Statement II is true as the legal system provided by the U.S. government is fundamental for the operation of a free enterprise economy, ensuring contracts are enforced and property rights are protected.
Learning Objectives
- Understand the function and influence of governmental measures on the economy, such as taxes, regulations, and supplying public goods and services.
- Comprehend the financial repercussions of external costs and benefits and their connection to market proficiency and breakdown.