Suppose the Production of a Good Results in Negative Externalities

question 72

Multiple Choice

Suppose the production of a good results in negative externalities. If output is at the intersection of the demand curve and the marginal social cost curve, then

• A)the socially optimal level of output will be produced.
• B)society will incur a net social cost.
• C)society will want less output produced, and producers will be willing to satisfy this desire at a price that society deems acceptable.
• D)b and c

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Definitions:

Positive Economics

A branch of economics that focuses on factual and cause-and-effect relationships, avoiding value judgments about what ought to be.

Production Possibility

A concept representing the various combinations of goods and services an economy can produce, given certain resources and technology.

Linear Production

A production process where inputs are combined in fixed proportions and the output level changes linearly with changes in input levels.

Labor Hours

A measure of the amount of work effort, in hours, performed by employees within a specific time period.