if you could verify/falsify my answers on these multiple choice questions and possible give me insight on possible correct answers, that would be great. thanks!
1. Which is an acceptable market method of regulating negative externalities?
A. Legal action against the source creating the externality
B. Tradable pollution credits
C. Huge penalty payable to society for the externality
D. Cash incentive given by the government for creating a positive externality
E. Closure of the production unit by government regulation
My Answer: D.
2. Externalities are called market failures because
A. resource allocation decisions are incorrectly made with the externalities present.
B. if all costs are not paid by the producer, overproduction will occur.
C. if all benefits do not flow to the buyer of the product, underproduction will occur.
D. costs and/or benefits will go to people not involved in the transaction.
E. All of the above.
My Answer: E.
These were the two questions I wasn't completely sure on so I apologize if they are both incorrect - that's why I'm here! Thanks so much.