If the Price of Bottled Water Is $2 and the Marginal

question 158

Multiple Choice

If the price of bottled water is $2 and the marginal cost of producing it is $2.5,

• A)bottled water is being produced in an increasing-cost industry.
• B)society will realize a net gain if more bottled water is produced.
• C)resources are being overallocated to bottled water.
• D)resources are being underallocated to all other goods.

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Definitions:

Coupon Interest Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, payable to the bondholder at specified intervals.

Tax Deductible

Expenses that reduce taxable income, as they can be subtracted directly from one's gross income before calculating the tax owed.

U.S. Tax System

The structured process by the government for collecting taxes from individuals, businesses, and other entities to fund public services and projects.

Operating Leverage

An indicator of how increases in revenue lead to expansions in operating income, showing the level of fixed expenses within a company's cost framework.