Which of the Following Statements Is False

question 76

Multiple Choice

Which of the following statements is false?

• A) In the case of a negative externality,the market equilibrium is inefficient.
• B) In the case of a negative externality,when a tax is set equal to the marginal external costs (MEC)efficiency can be achieved.
• C) In the case of a negative externality,when a tax is set that is greater than the marginal external costs (MEC)inefficiency will result.
• D) In the case of a positive externality,when a tax is set equal to the marginal external benefits (MEB)efficiency can be achieved.

---

Definitions:

Market Price

The cost at which the marketplace is currently trading assets or services.

Underwriting Spread

Underwriting spread is the difference between the price at which underwriters buy an issue from the issuer and the price at which they sell it to the public.

Issue Costs

Expenses associated with issuing new stocks or bonds, including underwriting, legal, and registration fees.

Subscription Price

The cost at which existing shareholders can purchase additional shares of stock in a company, often at a discount to the current market price.