Suppose External Costs Are Present in a Market Which Results

question 20

Multiple Choice

Suppose external costs are present in a market which results in the actual market price of $84 and market output of 320 units. How does this outcome compare to the efficient, ideal equilibrium?

• A) The efficient price would be higher than $84.
• B) The efficient price would be lower than $84.
• C) The efficient price would also be $84.
• D) The efficient output would be greater than 320 units.

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Definitions:

Switching Costs

The costs that a consumer incurs as a result of changing brands, suppliers, or products, which can include financial costs, time, and effort.

Preemptive Practices

Strategies or actions taken by a business to prevent competitors from entering their market or to gain an advantage over them.

Small Businesses

Companies with limited revenue and staff, playing a vital role in the economy by providing localized services and innovations.

Private-Sector Employees

Refers to individuals who are employed by businesses or organizations that are not owned or operated by the government.