If the Production of a Product or Service Involves External

question 129

Multiple Choice

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by

• A)providing a subsidy to correct for an overallocation of resources.
• B)providing a subsidy to correct for an underallocation of resources.
• C)imposing a corrective tax to correct for an overallocation of resources.
• D)imposing a corrective tax to correct for an underallocation of resources.

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Definitions:

Factors Of Production

The resources used in the creation of goods and services, including land, labor, capital, and entrepreneurship.

Inputs

The resources (such as labor, raw materials, and capital) used in the production process to create goods or services.

Resources

Assets, materials, and inputs used to produce goods and services.

Input Market

The market where resources or inputs such as labor, materials, and capital are bought and sold, allowing businesses to produce goods and services.