When a Firm Generates External Benefits, a More Efficient Outcome

question 93

Multiple Choice

When a firm generates external benefits, a more efficient outcome would result if

• A) the firm produced a larger output level.
• B) the firm reduced its output level.
• C) a tax were levied on the firm equal to the dollar amount of the externalities.
• D) price were fixed below the firm's per-unit cost.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the amount of liquid assets the company has available to build its business.

Net Investment

The total amount spent by a company on acquiring new assets, after subtracting disposals, intended to enhance the business’s earning capacity.

Plant Expansion

Plant expansion involves the process of enlarging a company's physical facilities, such as manufacturing plants or service centers, aiming to increase production capacity or operational efficiency.

Marginal Tax Rate

The rate at which an additional dollar of income would be taxed, pertaining to the highest tax bracket of an individual or entity.