If a Profit-Maximizing Perfectly Competitive Firm Does Not Have to Compensate

question 15

Multiple Choice

If a profit-maximizing perfectly competitive firm does not have to compensate society for a negative externality, the firm will choose to produce where

• A) price equals marginal cost.
• B) price equals marginal social cost.
• C) marginal cost equals marginal social cost.
• D) marginal revenue equals marginal social cost.

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Definitions:

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and the potential for dividends.

Fair Value Through Profit or Loss

A financial accounting method where changes in fair value of an asset or liability are reflected in the profit or loss as they occur.

Balance Sheet

A financial statement that shows a company’s assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity, often reflected by ownership of 20% to 50% of the voting stock.