Suppose That Cookie Producers Create a Positive Externality Equal to $2

question 3

Multiple Choice

Suppose that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?

• A)They are equal.
• B)The equilibrium quantity is greater than the socially optimal quantity.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Accounting Period

The specific time period during which financial transactions are recorded and financial statements are prepared, typically a quarter or a year.

Cost of Goods Sold

The total cost directly attributed to the production of goods sold by a company, including materials and labor costs but excluding indirect expenses.

Operating Expenses

Costs associated with a company's main operational activities, excluding the cost of goods sold.

Merchandising Companies

Companies that buy and sell goods without fundamentally changing their condition; they are involved in retail or wholesale.