Consider a Market in Which There Is an External Benefit

question 107

Multiple Choice

Consider a market in which there is an external benefit. The inefficient market equilibrium is such that

• A) marginal social cost is greater than marginal social benefit.
• B) price is too high.
• C) too much output is produced.
• D) too little output is produced.

---

Definitions:

Equal Payments

Regular payments of the same amount made over a period of time.

Compounded Annually

The process of calculating interest on both the initial principal and the accumulated interest from previous periods once a year.

Interest

The fee or rent that lenders charge for the use of their money.

Third Payment

The third installment of a payment series as agreed upon in a financial transaction or repayment plan.