If Production of a Good Creates External Benefits, a Competitive

question 45

Multiple Choice

If production of a good creates external benefits, a competitive market will likely produce

• A) less output than would maximize profit.
• B) more output than would maximize profit.
• C) less output than is efficient.
• D) more output than is efficient.

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Definitions:

Inverted Yield Curve

A rare financial situation where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.

Short-Term Interest Rates

Interest rates applicable on loans or financial instruments that are due for payment within a short timeframe, typically less than one year.

Long-Term Interest Rates

Interest rates applied to loans or financial assets that are due for repayment in a period longer than one year.

Risk Premiums

The additional return demanded by investors for taking on higher risk, over and above the risk-free rate of return.