If a Good Is Produced by Firms That Generate External

question 18

Multiple Choice

If a good is produced by firms that generate external costs, the price consumers pay

• A) will be efficient as long as it equals the marginal costs of the firms.
• B) will be too low.
• C) will be too high because the consumers end up paying the costs instead of the firm.
• D) will be the correct price, but the quantity sold of the good will be too large.

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Definitions:

Predictive Validity

The extent to which a score on a scale or test predicts future performance on a related outcome.

Concurrent Validity

A measure of how well a particular test correlates with a previously validated measure taken at the same time.

Construct Validity

The extent to which a test measures the theoretical construct or concept it is intended to measure.

Content Validity

A type of validity that examines how well a test samples a universe of items.