An Example of the Way That Externalities Distort the Allocation

question 62

Multiple Choice

An example of the way that externalities distort the allocation of resources is

• A) positive economic surplus.
• B) positive externalities only.
• C) negative externalities only.
• D) negative economic surplus.
• E) both positive externalities and negative externalities.

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Definitions:

Order Quantity

The amount of an item that is ordered from a supplier to replenish inventory or to fulfill customer demand.

Inventory Carrying Cost Rate

The total cost associated with holding inventory over a given period, often expressed as a percentage of the inventory value, including costs related to storage, insurance, taxes, and depreciation.

Reams

A measure of paper quantity, traditionally consisting of 500 sheets of paper.

Order Cost

The total expense incurred in placing and processing an order, including administrative expenses, shipping charges, and any other relevant costs.