Use the Following to Answer Questions

question 173

Multiple Choice

Use the following to answer questions:
-(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. Two tons of pollution is:

• A) too much.
• B) the efficient amount.
• C) not enough.
• D) the socially optimum amount.

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Definitions:

Explicit Costs

These are direct payments made to others in the course of running a business, such as wages, rent, and materials.

Implicit Costs

Costs that represent potential benefits foregone when resources are not utilized in their next-best alternative use.

Economic Profit

The financial gain achieved when revenues from business activity exceed the explicit and implicit costs of that activity.

Implicit Costs

Costs that represent the opportunity costs of using resources that the firm already owns, unlike explicit costs which involve direct monetary outlay.