When an external cost exists in the production of a good, firms tend to
A) under-produce the good since society pays these costs.
B) over-produce the good.
C) keep production constant throughout the year.
D) under-allocate resources to the production of the good.
B
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Efficiency is an important social goal because:
A. movements toward economic efficiency make the total economic pie larger. B. it assures a normative outcome. C. it assures a fair outcome. D. it takes into consideration the distribution of income.
A country produces only cans of soup and ink pens. If the country produces on its bowed outward PPF and increases the production of cans of soup, the opportunity cost of additional
A) cans of soup is decreasing. B) ink pens is increasing. C) cans of soup is increasing. D) cans of soup remains unchanged. E) More information is needed to determine what happens to the opportunity cost.
The largest component of GDP is:
a. personal consumption expenditures. b. government spending. c. durable goods. d. net exports. e. gross private domestic investment.
If a nation is currently operating at a point inside its production possibilities curve, it
A. can increase the output of one good without decreasing the output of the other good. B. has fully employed resources. C. has no inefficiently employed resources. D. is operating at full potential.