Question

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?
A. In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately rational but socially inefficient.
B. The lack of a fireworks display in Yankeeville is a case of market failure.
C. The lack of a fireworks display in Yankeeville arises because of an externality.
D. All of the above are correct.

Answer 1

Answer:

D. All of the above are correct.

Explanation:

Fourth of July is celebrated as anniversary of the of the adoption of the Declaration of independence in 1776.

So not displaying the fireworks in Yankeeville even though it was efficient for them to produce such display is a market failure, because of externality privately rational but socially inefficient decisions.