Externalities are a problem only if ?
Correct answer: A. decision makers do not take them into account
- A. decision makers do not take them into account
- B. all firms are perfectly competitive
- C. the externalities are negative
- D. all firms are monopolistic
Explanation
An externality becomes a problem when its effects are ignored by the decision maker, causing private costs or benefits to differ from social costs or benefits. Both positive and negative externalities can create inefficiency, so it need not be negative.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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