When the Production of a Good Creates a Positive Externality

question 135

Multiple Choice

When the production of a good creates a positive externality,

• A) external costs will be present.
• B) market output will be less than the socially optimal output level.
• C) market output will be more than the socially optimal output level.
• D) marginal social cost exceeds marginal private cost at the market equilibrium quantity.
• E) private costs are equal to social costs.

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Definitions:

Cost of Goods Sold

The total cost associated with making the products that a company sells during a period, including labor, materials, and overhead.

Balance Sheet

A report detailing a business's liabilities, assets, and equity held by shareholders at a particular moment, offering a glimpse into its financial status.

Spreadsheet

A spreadsheet is a digital document consisting of rows and columns used to organize, calculate, and manage data, commonly via applications such as Microsoft Excel or Google Sheets.

Manufacturing Overhead

encompasses all manufacturing costs that are not directly associated with the cost of raw materials or direct labor, including rent, utilities, and salaries of managers.