Multiple Choice
Which of the following best explains how privatization can help stimulate gains in economic efficiency when addressing externalities?
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7. Externalities
Public Solutions to Externalities
Multiple Choice
Which aspect of the PESTEL model is most directly relevant when governments design public solutions to externalities such as pollution?
A
Technological factors
B
Environmental factors
C
Social factors
D
Legal factors
Verified step by step guidance1
Understand that the PESTEL model is a framework used to analyze external factors affecting an organization or policy, where each letter stands for Political, Economic, Social, Technological, Environmental, and Legal factors.
Recognize that externalities like pollution are environmental issues that arise when the social cost of production or consumption is not reflected in market prices.
Identify that when governments design public solutions to externalities such as pollution, they focus on factors related to the natural environment and its protection.
Note that 'Environmental factors' in the PESTEL model specifically address ecological and environmental aspects, including pollution control, sustainability, and resource management.
Conclude that among the options given, 'Environmental factors' are most directly relevant because they relate to the impact of pollution and the need for regulatory or corrective measures.
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