When Social Costs of an Activity Exceed Private Costs

question 93

Multiple Choice

When social costs of an activity exceed private costs

• A) a market failure exists.
• B) there is a tendency for resources to be under-utilized.
• C) this means that resources are being efficiently used.
• D) the actual price is above the efficient price.

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Definitions:

Voting Stock

Shares that grant the shareholder voting rights in corporate decisions, typically involving the election of the board of directors.

Interest Revenue

Income earned from investments, loans, or other earning assets that yield interest over time.

Cash Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits in the form of cash.

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies by reporting these profits as income.