If Production of an Item Results in Negative External Costs

question 160

Multiple Choice

If production of an item results in negative external costs, then

• A) the market price is below the socially preferred price that reflects the external costs.
• B) the market price is above the socially preferred price that reflects the external costs.
• C) market forces will always correct the problem.
• D) the market quantity is too low from society's point of view.

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Definitions:

Self-Employment Tax

A social security and Medicare tax primarily for individuals who work for themselves.

Tax Liability

The total amount of tax that an individual or entity is legally obligated to pay to a tax authority.

Semiweekly Schedule Depositor

A tax deposit schedule required for employers who accumulate a certain amount of tax liability within a specific timeframe, mandating deposits to be made semi-weekly.

Federal Income Tax

Federal income tax is a tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.