When Negative Externalities Exist in the Production of a Good

question 139

Multiple Choice

When negative externalities exist in the production of a good, the marginal social cost of producing the good:

• A) is equal to the marginal benefit received by consumers if competitive markets exist and there is no government intervention.
• B) equals the marginal cost borne by the firm minus marginal cost borne by a third party that results from the production and consumption of the good.
• C) is less than the marginal cost borne by the firm.
• D) equals the marginal cost borne by the firm plus the marginal cost borne by third parties from the production and consumption of the good.

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Definitions:

Standard Error

A statistical measure that quantifies the amount of variability or dispersion for a sample statistic from the population parameter.

Sample Means

The average of values obtained from a sample, which is a subset of a larger population.

Bootstrap

A statistical method that resamples a single dataset to create many simulated samples, used for estimating the distribution of a statistic.

Standard Error

A statistical term that measures the accuracy with which a sample distribution represents a population using standard deviation.