A Marginal External Cost of a Product Is Equal to

question 53

Multiple Choice

A marginal external cost of a product is equal to

• A) what the producer has to pay to hire resources to produce another unit.
• B) the cost someone other than the producer incurs when another unit is produced.
• C) the cost the producer incurs to produce another unit.
• D) what the consumer must pay when he or she buys the good or service.
• E) None of these answers describes a marginal external cost.

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Definitions:

Limit Pricing

A strategy where a firm sets its product prices low enough to deter new competitors from entering the market.

Price Leader

A company or product that has a large enough market share to influence the price levels of its products or services in the industry.

Entry of New Firms

The process by which new companies enter an industry, often leading to increased competition and impacts on market prices and incumbent firms.

Oligopolistic Firms

Companies that operate in a market structure characterized by a small number of dominant firms, often leading to limited competition.