Firm XYZ Produces Paper Products, Which Sells for $100,000

question 29

Multiple Choice

Firm XYZ produces paper products, which sells for $100,000. However, the production of the paper results in air pollution. The cost of this negative externality is $6,000. What is the marginal private benefit (MPB) if this externality is ignored?

• A) $106,000
• B) $6,000
• C) $94,000
• D) $100,000

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Definitions:

Transference

The process by which emotions, desires, or expectations are redirected and applied to a new object or person, often unconsciously and stemming from previous relationships.

Primacy Effect

The tendency to remember and give more weight to information that is encountered first in a series.

Recency Effect

The phenomenon where more recently presented information is better remembered and has a stronger influence on judgment than older information.

Transference

In psychotherapy, the phenomenon where patients project feelings or attitudes from past relationships onto the therapist.