Which of the Following Describes How a Negative Externality Affects

question 65

Multiple Choice

Which of the following describes how a negative externality affects a competitive market?

• A)The externality causes a difference between the private cost of production and the social cost.
• B)The externality causes a difference between the private cost of production and the private benefit from consumption.
• C)The externality causes consumer surplus to exceed producer surplus.
• D)The externality causes a difference between the private cost of production and the equilibrium price.

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Definitions:

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, reflecting inflation or deflation.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, used to measure inflation and purchasing power.

Aggregate Demand Curve

A curve representing the relationship between the economy’s price level and real GDP demanded per period, with other things constant.