Suppose External Benefits Are Present in a Market Which Results

question 117

Multiple Choice

Suppose external benefits are present in a market which results in the actual market price of $62 and market output of 3,000 units. How does this outcome compare to the efficient, ideal equilibrium?

• A) The efficient price would be higher than $62.
• B) The efficient price would be lower than $62.
• C) The efficient price would also be $62.
• D) The efficient output would be less than 3,000 units.

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Definitions:

Cash-flow Hedge

A hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with an asset or liability or a forecasted transaction.

Purchase Order

An official document issued by a buyer committing to pay the seller for the sale of specific products or services.

Fair-value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability or an unidentified firm commitment that could affect profit or loss.

Drilling Machine

A tool used for making holes in various materials, part of machinery equipment.