The expected damage to innocent third parties per unit of the good produced is shown as the "external cost" in Figure 27.1. An unregulated competitive market for the product produces a quantity of Q* units, which sell for a price of P* per unit. If the competitive industry were producing the socially optimal quantity of this product, the market price of the product per unit would be 
A. P?-P*.
B. P?.
C. P*.
D. zero.
Answer: B
You might also like to view...
Growth in potential GDP in the United States is estimated to be about
A) 8.25% per year. B) 5.0% per year. C) 3.2% per year. D) 1.5% per year.
In basic terms, the current account is equal to
A) imports plus exports. B) savings minus consumption. C) exports minus imports. D) savings plus exports.
In which part of the business cycle is the Federal Reserve most likely to increase the discount rate to discourage banks from borrowing?
A) trough B) expansion C) peak D) recession E) depression
The difference between savings and saving
A. is called money illusion. B. is that savings occurs when consumption does not and saving is used to purchase consumption goods. C. is that savings is measured in real terms while saving is measured in nominal terms. D. is that savings is a stock concept and saving is a flow concept.