Question

what is an externality?
the cost imposed on firms due to pollution charges.
a situation where firms trade marketable permits.
a tax imposed on the production process.
a market exchange that affects a third party outside the transaction.
a regulation requiring firms to reduce pollution.
question 5
what are international externalities?
externalities internalized by market permit programs.
pollution costs imposed within a single nation.
externalities that cross national borders and cannot be resolved by one nation alone.
the total cost of pollution taxes on global firms.
a situation where firms reduce local external costs.
question 6
what ismarket failure?
when markets fail to allocate resources efficiently to balance social costs and benefits.
the failure to implement command-and-control regulations.
when firms fail to meet pollution standards.
a program where permits fail to reduce pollution.
a situation where taxes cannot resolve externalities.

Explanation:

• For the first question: An externality is defined as a market exchange that affects a third - party outside the transaction. Pollution charges (first option) are a policy to address externalities, not the definition. Trading permits (second option) is a market - based solution for externalities. A tax on production (third option) is a policy tool. A regulation to reduce pollution (fifth option) is also a policy, not the definition of externality.
• For the second question: International externalities are externalities that cross national borders and cannot be resolved by one nation alone. Externalities internalized by market permit programs (first option) is a solution. Pollution costs within a single nation (second option) is a domestic externality. The total cost of pollution taxes (fourth option) is a cost, not the definition. Firms reducing local external costs (fifth option) is a local action.
• For the third question: Market failure occurs when markets fail to allocate resources efficiently to balance social costs and benefits. Failure to implement regulations (second option), firms not meeting pollution standards (third option), permits failing to reduce pollution (fourth option), and taxes not resolving externalities (fifth option) are all issues related to market failure but not the definition.

Answer:

• First question: A market exchange that affects a third party outside the transaction.
• Second question: Externalities that cross national borders and cannot be resolved by one nation alone.
• Third question: When markets fail to allocate resources efficiently to balance social costs and benefits.