When External Costs Are Present in a Market

question 100

Multiple Choice

When external costs are present in a market,

• A) less of the good will be produced than the amount consistent with economic efficiency.
• B) more of the good will be produced than the amount consistent with economic efficiency.
• C) the amount of the good produced will be equal to the amount consistent with economic efficiency.
• D) corresponding external benefits are always generated.

Recognize sources of power within a distribution channel, such as economic influence and expertise.

Explain the causes of conflict in distribution channels, including vertical and horizontal conflicts.

Understand the concept of a channel captain and the roles it plays within the distribution channel.

Describe practices that restrain competition, such as exclusive dealing, tying arrangements, and resale restrictions.

---

Definitions:

Opportunity Cost

The value of the best alternative forgone when a choice is made, representing the benefits one could have received by taking an alternative action.

Gains From Trade

The benefit that entities receive from engaging in voluntary trade, often resulting in better allocation of resources and increased efficiency.

Comparative Advantage

The proficiency of an entity, whether it's an individual, corporate body, or state, to create a good or offer a service at a more economical opportunity cost than its competition.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing a particular course of action.