Suppose a Certain Good Provides an External Benefit

question 98

True/False

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, providing insights into its operational efficiency and financial health.

Consolidated Net Income

The total amount of net income earned by a parent company and its subsidiaries, presented as a single figure after eliminating inter-company transactions.

Bonds Payable

Long-term debts issued by corporations or governmental units, represented by formal certificates obligating the issuer to pay interest and repay principal at a specified maturity date.

Interest Expense

The cost incurred by an entity for borrowed funds, including loans, bonds, or lines of credit, typically shown as an expense on the income statement.