An Externality Occurs When

question 127

Multiple Choice

An externality occurs when

• A) some of the costs of producing a good are paid by someone other than the producer.
• B) the costs of producing a good are paid entirely by the producer.
• C) the marginal social cost of an activity increases as that activity is increased.
• D) Both answers A and C are correct.

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Definitions:

Constant Returns

An economic principle where increasing inputs in production results in a proportional increase in outputs.

Scale

A concept in economics that refers to the level at which a company or economy operates, particularly in terms of production and cost efficiency.

Soybean Grower

An individual or entity engaged in cultivating soybeans, often as a commercial farming operation, focusing on the production of soy for various uses including food products and industrial applications.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the cost on average of producing each unit.