Which of the Following Illustrates the Concept of External Cost

question 108

Multiple Choice

Which of the following illustrates the concept of external cost?

• A)Bad weather reduces the size of the wheat crop.
• B)A reduction in the size of the wheat crop causes income of wheat farmers to fall.
• C)Smoking harms the health of the smoker.
• D)Smoking harms the health of nearby nonsmokers.
• E)Public health services reduce the transmission of disease.

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Definitions:

Geographical Area

Refers to a specific physical region or location on Earth, identified by its natural or human-made characteristics.

Effective Cartel

A group of independent market participants who collude to increase their profits by attempting to manipulate market prices or limit market supply.

Pure Monopoly

A market structure where a single firm or entity controls the entire supply of a product or service, with no close substitutes.

Oligopolistic Industry

An industry characterized by a small number of firms that have significant control over market prices and high barriers to entry.