When externalities are present in a market, the well-being of market participants
a. are directly affected and market bystanders are indirectly affected.
b. and market bystanders are
both directly affected.
c. and market bystanders are both indirectly affected.
d. are indirectly
affected and market bystanders are directly affected.
i am guessing d?
To determine the correct answer, let's first understand what externalities are. Externalities refer to the spillover effects of an economic activity on parties not directly involved in the activity, resulting in either positive or negative impacts.
In this case, the question asks about the well-being of market participants and market bystanders when externalities are present. Market participants are the individuals or entities that actively participate in buying or selling goods or services in the market. Market bystanders, on the other hand, are individuals or entities who are not directly involved in the buying or selling but may still be affected by the externalities.
Option d states that market participants are indirectly affected, while market bystanders are directly affected. This is the correct answer.
When externalities are present, market participants will typically experience indirect effects on their well-being. For example, if there is a negative externality like pollution caused by a factory, market participants living nearby may experience health problems or property damage as a result. These effects are indirect because they are not immediate consequences of market transactions but rather external costs imposed on individuals.
On the other hand, market bystanders, who may not be directly participating in the market, can also be directly affected by externalities. Using the same pollution example, the pollution may affect individuals who are not involved in the production or consumption of the goods produced by the factory but are still impacted by the pollution in terms of health or environmental conditions.
Hence, option d, "are indirectly affected and market bystanders are directly affected," is the correct answer.