If the Costs of Coordination and Enforcement Are _______ the Surplus

question 108

Multiple Choice

If the costs of coordination and enforcement are _______ the surplus lost to the externality, then a private solution will _______.

• A)higher than; not work
• B)lower than; not work
• C)higher than; work
• D)None of these are true.

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Definitions:

Mixed Costs

Mixed costs are expenses that contain both variable and fixed cost elements, changing in total with the level of activity but not directly in proportion to changes in activity level.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future investment or business decisions.

Variable Costs

Expenses that directly fluctuate in relation to the amount of goods produced or the volume of sales.

Total Fixed Cost

The sum of all costs that do not change with the level of output or sales in the short term, such as rent and salaries.