Consider Two Goods - One That Generates External Benefits and Another

question 127

Multiple Choice

Consider two goods - one that generates external benefits and another that generates external costs. The actual market outcome would

• A) result in a price that is lower than the efficient price for both goods.
• B) result in a price that is higher than the efficient price for both goods.
• C) result in a price that is lower than the efficient price for the good with an external benefit and a price that is higher than the efficient price for the good with an external cost.
• D) result in a price that is higher than the efficient price for the good with an external benefit and a price that is lower than the efficient price for the good with an external cost.

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Definitions:

Unadjusted Trial Balance

A preliminary report in accounting that lists all the balances from all the accounts before any end-of-period adjustments are made.

Adjustments

Changes made to accounts to record actual events that have occurred but haven't yet been recorded by the end of the accounting period.

Income Statement

A financial document that shows a company's revenues, expenses, and net income over a certain period of time.

Adjusted Trial Balance

A list of all the accounts of a company, showing the balance of each after adjustments have been made for journal entries, typically used in the preparation of financial statements.