If an Unregulated Activity Produces a Negative Externality,one Can Infer

question 153

Multiple Choice

If an unregulated activity produces a negative externality,one can infer that the

• A) equilibrium price is greater than the socially optimal price.
• B) demand for the activity is greater than the socially optimal demand.
• C) equilibrium quantity is greater than the socially optimal quantity.
• D) equilibrium quantity is less than the socially optimal quantity.
• E) supply of the activity is less than the socially optimal supply.

---

Definitions:

Aggregate Demand

The sum total of desires for products and services within an economic entity, marked at a specific price level through a chosen timeframe.

Expansionary Gap

Occurs when an economy's actual output is higher than the potential output, often leading to higher inflation.

Active Approach

A management strategy where decisions are made using discretionary methods to try to outperform the market or a specific benchmark.

Potential GDP

Potential GDP is the maximum possible output an economy can produce with full employment of its resources, without causing inflation.