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Market and market failure
Goods and services have a value for society.
Which of the following statements is true?
Case study 5 from the ELD Interim Report portrays deforestation in Costa Rica. In the past, privately owned forests were rapidly converted into more profitable agricultural land. Agricultural land is more profitable because the services derived from such land are marketable.
In this context, which of the following are non-marketed ecosystem services derived from forest land?
Costs of pollution resulting from production may or may not be included in the total cost of production.
Which of the following pricing models describes an internalized externality?
Externalities are negative if costs are imposed on a third party. However, the provision of a benefit free of charge is a positive externality.
Which of the following ventures might provide positive externalities?
Agricultural products are marketed goods; they are traded on the world market and have an assigned market price. However, the market price of an agricultural commodity does not necessarily reflect all costs of provision for society as a whole – we call this an externality. An externality in the price for an agricultural product is caused by a discrepancy between private (farmer) and social (society) costs or benefits.
From society’s point of view: Which of the following constitutes an externality in the provision of agricultural products?