An Externality

question 5

Multiple Choice

An externality

• A) enhances the efficiency of the market system.
• B) is not an economic problem because it is external to the market.
• C) is a private cost or benefit.
• D) accrues to someone who had nothing to do with the production or consumption of a good or service.
• E) refers to some unexpected change in the equilibrium price or quantity of a product.

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Definitions:

Linear Marginal Cost

Refers to a situation where the additional cost of producing one more unit of output is constant.

Competitive Market

A market structure characterized by a large number of firms, none of which can influence market price by acting alone.

Identical Firms

Companies within a market that produce homogeneous products or services with no distinct differences from the consumer's perspective.

Market Supply Curve

The market supply curve is a graphical representation that shows the relationship between the quantity of goods that producers are willing to sell and the price of these goods.