In a Market Where Firms Are Able to Reduce Their

question 28

Multiple Choice

In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will NOT happen?

• A) Negative externalities will be observed.
• B) Output of the good being produced will be too low.
• C) Prices will be too low relative to the social optimum.
• D) Inefficiencies will occur.

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Definitions:

Honesty in Fact

A concept referring to the genuine intention or belief without intent to deceive in transactions or dealings.

Conform to Contract

The requirement that goods or services supplied under a contract must meet the specifications agreed upon in the contract.

Substitute Goods

Products or services that can be used in place of one another, offering consumers alternatives.

Risk of Loss

Risk of loss refers to the legal and financial responsibility for damages, destruction, or loss of property, often determining who bears this risk during transactions or in the event of unforeseeable incidents.