Exhibit 30-4 ​ Refer to Exhibit 30-4. If a Negative Externality Exists, Then

question 146

Multiple Choice

Exhibit 30-4 ​

Refer to Exhibit 30-4. If a negative externality exists, then curve __________ represents the marginal social cost curve and the area __________ represents the market failure.

• A)1; ACB
• B)3; BCD
• C)2; BCD
• D)3; ACB
• E)2; ACB

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Definitions:

Trading Off

The act of giving up one benefit in order to gain another, often seen as a compromise.

Rationale

The underlying reasons or logical basis for a belief, action, or method.

Premature Dominance

The early establishment of control or influence in a situation before all factors have been appropriately considered.