In a Market Where Negative Externalities Are Associated with Consumption

question 223

Multiple Choice

In a market where negative externalities are associated with consumption and production, the equilibrium will not be efficient because

• A)too few resources will be allocated toward producing the good.
• B)firms will shut down until costs are reduced.
• C)costs of production will, on average, be too high.
• D)too many resources will be allocated toward producing the good.

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Definitions:

Compensation Costs

The expenses incurred by a company to pay employees, including salaries, benefits, bonuses, and social security contributions.

Grant Date

The date on which an employee receives a stock option or grant as part of their compensation package.

Stock-Based Compensation

A method of paying employees or service providers using shares of the company's stock, reflecting a form of non-cash compensation.

APB Opinion

Issued by the Accounting Principles Board, these were intended to shape accounting standards and guidance before the board was replaced by the Financial Accounting Standards Board (FASB).