Answer:
C. may improve market outcomes in the presence of externalities.
Explanation:
Externalities are situations where the actions of one entity influence the consumptions or production decisions of others. In economics, externalities refer to the production or consumption of goods and services, leading to a benefit or cost to a third party. Externalities are either positive externality and negative.
Negative externalities are production or consumption activities that cause harm to third parties. Positive externalities benefit others. In the market economy, externalities result in inefficiency. In the presence of externalities, producers or consumers tend not to focus on the true worth of goods and services on offer. The government intervenes to improve market outcomes through regulation and legislation.
