Suppose External Costs Are Present in a Market Which Results

question 30

Multiple Choice

Suppose external costs are present in a market which results in the actual market price of $50 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

• A) The efficient outcome would be greater than 800 units.
• B) The efficient outcome would be less than 800 units.
• C) The efficient outcome would also be 800 units.
• D) The efficient price would be less than $50.

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Definitions:

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits through dividends.

Basic Earnings

Typically refers to basic earnings per share, which is a measure of the amount of profit attributable to each outstanding share of a company's common stock.

Reacquired

Refers to assets or securities that have been repurchased or bought back by the company that originally issued them.

Noncumulative Preferred Stock

A type of preferred stock on which the right to receive dividends ends if the dividends are not declared in the year they are earned.