Asked by Y. M. Hylton on Jun 05, 2024
Verified
Which of the following is the best example of a market failure that would lead a firm to extract resources at a rate that is faster than the rate that would maximize its long-term stream of profits?
A) The market price of the resource rises.
B) Weak property rights create fears that firms will not be allowed to extract in the future.
C) An increase in market interest rates.
D) New information suggests that the demand for the resource will be greater in the future.
Market Failure
The inability of a market to bring about the allocation of resources that best satisfies the wants of society; in particular, the overallocation or underallocation of resources to the production.
Property Rights
Legal rights to possess, use, and dispose of assets such as land, buildings, goods, or intellectual property.
Long-Term Stream
A strategy or planning horizon that focuses on achieving goals or outcomes over an extended period, rather than immediate results.
- Identify market failures that affect the rate of resource extraction.
Verified Answer
Learning Objectives
- Identify market failures that affect the rate of resource extraction.
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