Refer to the Below Diagram of the Market for Product

question 2

Multiple Choice

Refer to the below diagram of the market for product X.Curve S_t embodies all costs (including spillovers) and D_t embodies all benefits (including spillovers) associated with the production and consumption of X.Assuming the equilibrium output is Q₂, we can conclude that the existence of spillover:

• A)costs have resulted in an over-allocation of resources to X.
• B)benefits have resulted in an over-allocation of resources to X.
• C)costs have resulted in an under-allocation of resources to X.
• D)benefits have resulted in an under-allocation of resources to X.

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Definitions:

Direct Method

A method for preparing the cash flow statement that lists major classes of gross cash receipts and payments.

Income Tax Expense

The cost associated with the taxes on a company's taxable income, reflecting the amount of income tax a company expects to pay to the government.

Income Taxes Payable

The sum of income tax that a corporation is liable to pay to the government but has not paid so far.

Cash Payments

Transactions involving the transfer of cash from one entity to another as a form of compensation or settlement.