When a Competitively Produced Product Has Negative Externalities in Production,the

question 33

Multiple Choice

When a competitively produced product has negative externalities in production,the industry will

• A)overproduce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium.
• B)overproduce the good because marginal private cost is less than marginal private benefit in competitive equilibrium.
• C)underproduce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium.
• D)underproduce the good because marginal private social cost is less than marginal private benefit in competitive equilibrium in competitive equilibrium.

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Definitions:

Manufacturing Overhead

All indirect costs related to the production process, including salaries, maintenance, and utilities, not directly attributable to specific units produced.

Unit Product Cost

The total cost to produce one unit of a product, calculated by dividing the total production costs by the number of units produced.

Direct Labor-hours

The total hours of labor directly involved in manufacturing a product or providing a service, typically used as a basis for allocating overhead costs.

Manufacturing Overhead

All indirect costs associated with manufacturing, like utility costs for the factory, depreciation of manufacturing equipment, and factory management salaries.