Economics · Market Failure and Externalities
Which one of the following statements is not correct regarding externalities and market outcomes?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1The market mechanism over-produces a good that generates a positive externality.✓
- 2A cap-and-trade system of pollution permits can be used by the government to achieve the social optimum.
- 3The optimal amount of subsidy in the case of an activity that produces a positive externality is the difference betwee n the social benefit and the private benefit at the optimum.
- 4Tragedy of the Commons is an example of a negative externality.
Correct answer
The market mechanism over-produces a good that generates a positive externality.
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Economics?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Market Failure and Externalities MCQs →Want more practice questions on Market Failure and Externalities?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Economics · Market Failure and Externalities