Multiple Choice
Which of the following is a safety net program that redistributes income?
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7. Externalities
Public Solutions to Externalities
Multiple Choice
Which of the following is a non-economic factor that can block the formation of effective economic policy to address externalities?
A
Market failure
B
Tax incidence
C
Price inelasticity
D
Political opposition
Verified step by step guidance1
Understand the concept of externalities: Externalities occur when a third party is affected by the production or consumption of a good or service, leading to market failure if not addressed properly.
Recognize that economic policies aimed at correcting externalities often involve tools like taxes, subsidies, or regulations to internalize the external costs or benefits.
Identify economic factors that influence policy effectiveness, such as market failure (which justifies intervention), tax incidence (who bears the tax burden), and price inelasticity (how quantity demanded responds to price changes).
Distinguish non-economic factors that can block policy formation, such as political opposition, which involves social, institutional, or ideological resistance rather than economic mechanisms.
Conclude that among the options, political opposition is a non-economic factor because it relates to the political environment and stakeholder interests rather than economic principles or market behavior.
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