In the Case of an External Benefit, the Social Cost

question 117

Multiple Choice

In the case of an external benefit, the social cost curve lies ______ the supply curve.

• A) above
• B) below
• C) with
• D) sometimes above and sometimes below

---

Definitions:

Long-run Output

The maximum amount of goods and services an economy can produce when it fully utilizes its resources, typically considered over a period where all inputs can be adjusted.

Costs of Inflation

The negative impacts of inflation, such as reduced purchasing power, uncertainty in the economy, and the possible distortion of investment and savings decisions.

Income Effect

The change in consumer's purchasing behavior due to a change in their income, affecting how much of a product they buy.

Tax Revenues

The income that is gained by governments through taxation, used to fund public services, infrastructure, and government obligations.