When External Costs Exist

question 44

Multiple Choice

When external costs exist,

• A)There is government failure.
• B)Market prices do not convey the full costs of production.
• C)The market achieves the optimal mix of output.

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Definitions:

GDP

The total value of all ultimate goods and services generated within a country during a designated period is known as the Gross Domestic Product.

GDP Deflator

An economic metric that converts output measured at current prices into constant-price output, making it possible to compare the real value of aggregate production across different periods.

Base Year

A reference year used in economic index calculations, price comparisons, and economic data to account for the effects of inflation.

Unreported Income

Earnings not declared to tax authorities, often to evade taxation; part of the informal or shadow economy.