A Result of a Positive Externality in the Production of a Good

question 158

Multiple Choice

A result of a positive externality in the production of a good is that

• A) the price system will over-allocate resources to the production of that good or service.
• B) the price system will under-allocate resources to the production of that good or service.
• C) the market supply will be too high.
• D) the market demand will be too high.

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Definitions:

Required Return

The minimum expected return an investor demands for an investment, considering the risk associated with it.

Absorption Costing

An accounting method that includes all of the costs associated with production, including variable costs and fixed overhead.

Selling Price

The amount of money charged for a product or service, or the sum the market will bear.

Return On Investment

measures the gain or loss generated on an investment relative to the amount of money invested.