Q. Which of the following statements does not represent a market failure, i.e., a situation in which the pursuit of profit will not result in a net increase in consumer satisfaction?
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(A)
The costs of pollution, groundwater contamination and depletion, soil erosion and nuclear waste disposal are borne by parties external to the economic exchange between buyer and seller.
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(B)
Where there is no mechanism for pricing, for setting a value on, public goods, there is no guarantee that the markets result in the optimal satisfaction of the public interest in regard to public goods.
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(C)
Situations in which externalities have been internalized result in an equilibrium in the exchange price between true costs and benefits.
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(D)
The pursuit of individual self-interest results in a worse outcome than would have occurred had the behavior of the parties involved in the economic exchange been coordinated through cooperation or regulation rather than mere competition.
✅ Correct Answer: (C)
Situations in which externalities have been internalized result in an equilibrium in the exchange price between true costs and benefits.