If External Costs Exist,the Competitive Free Market

question 146

Multiple Choice

If external costs exist,the competitive free market:

• A)allocates resources inefficiently.
• B)allocates resources efficiently.
• C)automatically corrects an overallocation of resources.
• D)automatically corrects an underallocation of resources.

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Definitions:

Price Increases

A rise in the cost of goods or services, often measured by the rate of inflation.

Quantity Demanded

The total amount of a good that consumers are willing to purchase at a given price over a specified period.

Monopolistically Competitive Firm

A company that operates in a market with many competitors, each offering slightly differentiated products.

Product Differentiation

Making a product or service stand out to a particular target market by distinguishing it from competitors.