When the Production of a Good Creates an External Cost

question 104

Multiple Choice

When the production of a good creates an external cost, to achieve the efficient quantity governments can set taxes (T) such that

• A) MSC = MC + T.
• B) MC = MSC + T.
• C) T = MC + MSC.
• D) MSC = MC - T.

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Definitions:

Exclusive Distribution

Strategy in which only selected retailers can sell a manufacturer’s brand.

Retailing

The set of business activities that add value to products and services sold to consumers for their personal or family use; includes products bought at stores, through catalogs, and over the Internet, as well as services like fast-food restaurants, airlines, and hotels.

Daisy Brand

A company known for its dairy products, especially sour cream and cottage cheese, emphasizing quality and natural ingredients.

Dollar General

An American chain of variety stores headquartered in Tennessee, known for selling low-priced products.