When a Good Generates a Negative Externality in the Market

question 60

Multiple Choice

When a good generates a negative externality in the market:

• A) society's scarce resources are allocated efficiently.
• B) its marginal social cost is greater than its marginal private cost.
• C) the good's price accurately reflects the cost of the externality.
• D) the quantity demanded of the good will be equal to zero.

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Definitions:

Lurking Variable

A variable that is not directly studied but can affect the variables of interest in an experiment, potentially leading to misleading conclusions if not accounted for.

Cause-And-Effect

A relationship between two events where the first event (cause) is responsible for the second event (effect).

TV Sets

Devices designed to receive and display television broadcasts.

Life Expectancy

The average period that an individual is expected to live based on current mortality and health trends.