If There Are External Costs in Production and Firms Do

question 146

Multiple Choice

If there are external costs in production and firms do not have to account for these costs, then firms will produce

• A) at the efficient level.
• B) an output level that is below the efficient level.
• C) an output level that is above the efficient level.
• D) an output level that is either above or below the efficient level.

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Definitions:

Labor-saving

Technologies or methods that decrease the amount of work required to produce goods or services, often leading to increased efficiency.

Marginal Productivity

The additional output that results from using one more unit of a factor, holding all other inputs constant.

Labor-saving

Technologies or methods that reduce the amount of work required to produce goods or services, often leading to increased efficiency and productivity.

Competitive Firm

A company operating in a market where it has little to no influence over the price of its product or service, typically due to the presence of many other firms offering similar products.