Consider Two Goods--One That Generates External Costs and Another That

question 98

Multiple Choice

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

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

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Definitions:

Invested Assets

Assets that are allocated into various investment vehicles such as stocks, bonds, real estate, or other securities with the expectation of earning a return.

Operating Income

The profit realized from a business's operations, after deducting operating expenses like wages and cost of goods sold from gross profit.

Investment Turnover

A measure of a company's ability to generate sales from its investments; calculated by dividing sales by average invested assets.

Profit Margin

The amount by which revenue from sales exceeds costs in a business, expressed as a percentage of total sales.