Consider a Market in Which There Is an External Benefit

question 193

Multiple Choice

Consider a market in which there is an external benefit. The inefficient market equilibrium is such that

• A) too little output is produced.
• B) too much output is produced.
• C) price is too high.
• D) marginal social cost is greater than marginal social benefit.

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Definitions:

Fixed Monthly Expenses

Recurring costs that do not vary in total within a given period, such as rent, salaries, and insurance premiums, irrespective of the level of business activity.

Net Operating Income

The profit a company generates from its regular, core business operations, excluding any income from investments or secondary sources.

Selling Price

The price at which a service or product is sold to a buyer.

Net Operating Income

The total profit of a company after subtracting operating expenses but before interest and taxes.