If Positive Externalities Are Present in the Production of a Good

question 4

Multiple Choice

If positive externalities are present in the production of a good, what will society do?

• A) It will produce too much of the good, since the marginal private benefit to consumers is less than the marginal social benefit.
• B) It will produce too little of the good, since the marginal private benefit to consumers is less than the marginal social benefit.
• C) It will produce too little of the good, since the marginal private benefit to consumers is greater than the marginal social benefit.
• D) It will produce too much of the good, since the marginal private benefit to consumers is greater than the marginal social benefit.

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Definitions:

Markup

The amount added to the cost price of goods to cover overhead and profit, determining the selling price.

Make-Or-Buy Decision

A strategic decision-making process used by companies to determine whether it is more cost-effective to produce goods internally or buy them from an external supplier.

Cost Savings

Reductions in expenses achieved through efficiency improvements, budget adjustments, or other financial strategies.

Production Opportunities

Situations or contexts in which a company has the potential to increase its output, efficiency, or product offerings.