In the Case of an External Cost

question 89

Multiple Choice

In the case of an external cost:

• A) the agent responsible for the cost must pay for the cost.
• B) the government will always pay the cost.
• C) the agent responsible for the external cost will produce too much of the good or service involved.
• D) there is generally an offsetting social benefit.

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Definitions:

Recession Risk

The probability of an economy experiencing a period of negative growth, leading to a decrease in employment, income, and production.

Department Stores

Large retail establishments that offer a wide variety of goods divided into departments for shoppers.

Inferior Goods

Products whose demand decreases as consumer income rises, opposite to what is observed with normal goods.

Substantial Performance

A legal concept indicating that a party has fulfilled enough of its contractual obligations to warrant payment, even if some minor specifications are not met.