In a Market Where There Are External or Negative Externalities

question 32

Multiple Choice

In a market where there are external or negative externalities associated with consumption and production, the equilibrium will not be efficient because:

• A)price will be greater than MC.
• B)firms will shut down until costs are reduced.
• C)costs of production will, on average, be too high.
• D)too many resources will be allocated to production of the good.

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Definitions:

Overconsumption

The excessive use of goods and services, surpassing what is necessary or sustainable, which can lead to environmental degradation and resource depletion.

Health Care

Services provided to individuals or communities to promote, maintain, or restore health.

Out-Of-Pocket Costs

Direct payments made by consumers for goods, services, or healthcare that are not reimbursed by insurance or other means.

Funding

The act of providing financial resources for a project, business, or any initiative requiring money.