Which of the Following Is a Likely Consequence of a Negative

question 21

Multiple Choice

Which of the following is a likely consequence of a negative externality, given that the market is allowed to operate freely?

• A) An efficient allocation of resources
• B) Production of less than the socially efficient quantity of the good
• C) Production of more than the socially efficient quantity of the good
• D) Social costs that are equal to private costs
• E) Marginal private cost exceeding marginal social cost at the market equilibrium quantity

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Definitions:

Economic Theory

A set of principles and models that seeks to explain how economies work and the behaviors of economic actors.

Real-world Events

Occurrences or developments that happen in the physical world, beyond theoretical or hypothetical situations.

Assumptions

Premises or conditions accepted as true without proof, used as bases for reasoning or an argument.

Secondary Effects

The indirect impacts that follow the primary effects of a decision or action in economics, often unforeseen or unintended.