Suppose External Costs Are Present in a Market Which Results

question 11

Multiple Choice

Suppose external costs are present in a market which results in the actual market price of $24 and market output of 325 units. How does this outcome compare to the efficient, ideal equilibrium?

• A) The efficient outcome would be greater than 325 units.
• B) The efficient outcome would be less than 325 units.
• C) The efficient outcome would also be 325 units.
• D) The efficient price would be less than $24.

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Definitions:

Deposits

Funds placed into an account at a financial institution for safekeeping, which may earn interest over time depending on the account type.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon) periodically until the maturity date, at which point the principal amount is repaid.

Yield To Maturity

The total return expected on a bond if it is held until the maturity date.

Market Price

The market's current selling or purchasing rate for a service or asset.