When a Negative Production Externality Is Present in a Market

question 97

Multiple Choice

When a negative production externality is present in a market:

• A)private costs are less than social costs.
• B)private costs are less than external costs.
• C)social costs are less than external costs.
• D)external costs are equal to social costs.

---

Definitions:

Parking

The act of stopping and disengaging a vehicle and leaving it unoccupied.

Implicit Costs

Additional costs that do not appear on the financial statements of a company. These costs include items such as the opportunity cost of capital.

Economic Profits

Profits that exceed the opportunity costs of all resources used by the firm, including both explicit and implicit costs.

Sunk Costs

Costs that cannot be recovered. They are unavoidable even in the long run.