If an External Cost Exists, Who Bears It in an Unregulated

question 117

Multiple Choice

If an external cost exists, who bears it in an unregulated, competitive market transaction?

• A) The federal government
• B) Someone other than the producers
• C) The buyers of the product
• D) Nobody

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Definitions:

Aggregate Demand

Represents the total demand for goods and services within a particular economy at a given overall price level and in a given time period.

Tax Cut

A tax cut involves a reduction in the amount of taxes imposed by a government, which can affect consumer spending, investment, and economic growth.

MPC

The marginal propensity to consume (MPC) indicates the proportion of an increase in income that a consumer will spend on consumption rather than saving.

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector investment due to higher interest rates.