When Production of a Good Results in an External Cost,the

question 29

Multiple Choice

When production of a good results in an external cost,the unregulated competitive market equilibrium is inefficient because ________.

• A) MSC = MC
• B) MSC = MB
• C) MSC > MB
• D) MSC < MB
• E) MSC is undefined

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Definitions:

Total Revenue

The total amount of money a company generates from the sale of goods or services before any expenses are subtracted.

Demand Elastic

Refers to how sensitive the quantity demanded of a good is to a change in its price; high elasticity indicates consumers will significantly alter their demand in response to price changes.

Price Effect

The impact on the quantity demanded of a good or service resulting from a change in its price, holding all other factors constant.

Quantity Effect

The change in quantity demanded or supplied of a good or service due to a change in its price.