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:

Linear Equation

An algebraic equation in which each term is either a constant or the product of a constant and a single variable, and the graph forms a straight line.

Solve

Finding the value of variables that satisfy a given mathematical equation or inequality.

Linear Equation

An equation between two variables that produces a straight line when graphed.

Solve

To find an answer to a problem or the solution to an equation.