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Externalities can cause market failure if the full social costs and social benefits of production and consumption are not taken into account.
when there has been a market failure
Externalities. A more proper definition for an externality is a transaction between two economic agents which affects a third, non-participating agent. Whether or not externalities are corrected for in a market is a matter of debate in economic theory.
Price or market system
Externalities and market failure will result from the difficulty of enforcing property rights.
True
when there has been a market failure
Externalities can cause market failure if the full social costs and social benefits of production and consumption are not taken into account.
when there has been a market failure
The willingness of a farmer to sell at different prices regardless of demand will reflect perfect competition.
Externalities is the positive (or negative) effect to the society due to consumption (production) of a good by an individual.The answer assumes that the externality in which Nigeria is facing is a negative externality. Ways to correct negative externalities are:Taxation: By increasing tax, we discourage production of such good, reducing negative externalitiesNegative advertising: similarily, this method aims to reduce demand for the said goodTradable permit: The best example for this is the "Cap 'n' Trade" scheme used by the United States government. This aims to reduce the amount of negative externalities year by year.Banning of that good: One can ban the production of that good and make it illegal (drug.) However, this is likely to create a parallel market (black market)
total benefit to society from that market
Externalities
Externalities. A more proper definition for an externality is a transaction between two economic agents which affects a third, non-participating agent. Whether or not externalities are corrected for in a market is a matter of debate in economic theory.
Price or market system
it does not take into account market power, public goods, merit goods and externalities. it works in a free market and not in a controlled one.