Multiple Choice
Which of the following is an example of government regulation addressing externalities in the automobile industry?
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7. Externalities
Public Solutions to Externalities
Multiple Choice
Which of the following is considered a major hurdle to successful global trade in the context of public solutions to externalities?
A
Lack of international coordination in environmental regulations
B
Perfect information among all market participants
C
Absence of any externalities in production or consumption
D
Unlimited government resources for enforcement
Verified step by step guidance1
Understand the context: The problem is about identifying a major hurdle to successful global trade when dealing with public solutions to externalities. Externalities occur when a third party is affected by the production or consumption of goods, and public solutions often involve regulations or policies.
Recall the nature of externalities in global trade: Externalities, especially environmental ones, often cross national borders, making unilateral actions by one country insufficient to address the problem effectively.
Analyze each option: Perfect information among market participants is ideal but not typically the main hurdle in global trade externalities. Absence of externalities would mean no problem exists, so it cannot be a hurdle. Unlimited government resources for enforcement is unrealistic but not the key issue highlighted here.
Focus on international coordination: Since externalities can affect multiple countries, lack of coordination in environmental regulations means countries may have conflicting policies or enforcement levels, which hinders effective global solutions and trade.
Conclude that the major hurdle is the lack of international coordination in environmental regulations because it prevents consistent and effective management of externalities across borders, which is essential for successful global trade.
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