The Basic Reason That a Competitive Unregulated Market Produces an Inefficient

question 40

Multiple Choice

The basic reason that a competitive unregulated market produces an inefficient amount of a good with an external cost because

• A) producers cannot measure marginal social cost.
• B) producers do not pay the external cost.
• C) the general public does not care about external costs.
• D) external costs are not a political issue.
• E) the external cost is paid by consumers rather than producers.

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Definitions:

Opportunity Cost

The potential benefit missed out on when choosing one alternative over another; essentially, it's the cost of foregoing the next best option.

Individual Choice

Decision-making by individuals based on their preferences, resources, and trade-offs they face.

Productive Capacity

The maximum output that an economy can produce without increasing inflation, driven by available resources and technology.

Specialization

The focus of a business, region, or individual on producing a limited range of goods or services to gain greater efficiency and productivity.