A Negative Externality Results from the Sale of Firewood in Competitive

question 13

Multiple Choice

A negative externality results from the sale of firewood in competitive markets. Then it follows that:

• A) the marginal private cost of firewood is less than its marginal social cost.
• B) the marginal private cost of firewood exceeds its marginal social cost.
• C) the marginal private benefit of firewood is less than its marginal social benefit.
• D) the marginal private benefit of firewood exceeds its marginal social benefit.

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Definitions:

Pump Division

A specialized section within a company focusing on producing and managing pump-related products and services.

Transfer Price

The cost at which various units within the same corporation sell goods and services to each other.

Idle Capacity

The unused portion of a company's production capacity, where resources such as space, labor, or equipment are underutilized.

Contribution Margin

The amount of revenue remaining after deducting variable costs, contributing to covering fixed costs and profit.