When External Costs Are Present

question 66

Multiple Choice

When external costs are present

• A) transaction costs will be high.
• B) a tax might be able to create efficiency.
• C) property rights have already been established.
• D) competitive, unregulated markets are efficient.

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Definitions:

Benefits Accrue

The accumulation of advantages or positive results over time from an action or investment.

Purely Competitive

A market structure characterized by many participants offering identical products, where no single buyer or seller can influence the market price.

Economic Profits

The excess of total revenue over total costs, including both explicit and implicit costs, as calculated in economic theory.

Normal Profits

The minimum level of profit necessary for a company to remain competitive in the market, essentially covering opportunity costs but not generating excess profit.