If There Are External Costs of Production and Firms Do

question 185

Multiple Choice

If there are external costs of production and firms do not have to account for these costs, then the firms will ________ and ________ compared with the efficient values.

• A) underproduce; underprice
• B) underproduce; overprice
• C) overproduce; underprice
• D) overproduce; overprice

---

Definitions:

Marketing-Related Product Failure

Occurs when a product does not meet the expected sales or market acceptance due to marketing strategy flaws such as misidentification of target audience or incorrect positioning.

Derived Demand

The demand for a product or service that arises from the demand for another product or service, such as the demand for steel being derived from the demand for automobiles.

Dynamically Continuous Innovations

Innovations that represent a moderate change to an existing product that requires a slight change in consumer behavior.

Discontinuous Innovations

Innovations that create a significant change in consumer behavior or revolutionize the way a market functions, often by introducing a completely new product or service.