If Firms Have to Account for External Costs in Production

question 59

Multiple Choice

If firms have to account for external costs in production, then they will produce an output level that is ________ the efficient level.

• A) at
• B) below
• C) above
• D) either above or below

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Definitions:

Average Revenue

The revenue earned per unit of output sold, calculated by dividing total revenue by the number of units sold.

Market Structures

The organizational and other characteristics of a market, including the level of competition, product differentiation, and the ease of entry and exit, which determine the nature of pricing and output decisions.

Purely Competitive Firm

A company operating in a market with many sellers offering identical products, where no single seller can influence the market price.

Downward-sloping

A description of a line or curve on a graph that represents a decrease in one variable in response to an increase in another variable, commonly used to describe demand curves in economics.