When an External Cost Exists in the Production of a Good

question 260

Multiple Choice

When an external cost exists in the production of a good, firms tend to

• A) under-produce the good since society pays these costs.
• B) over-produce the good.
• C) keep production constant throughout the year.
• D) under-allocate resources to the production of the good.

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Definitions:

General Journal

A primary accounting record used to record all types of transactions before they are posted to specific accounts in the general ledger.

General Journal

A primary accounting record used to record all types of accounting transactions before they are posted to individual accounts in the general ledger.

Legal Fees Revenue

Income earned by businesses or individuals through providing legal services.

General Journal

A fundamental accounting ledger where financial transactions are initially recorded before being transferred to specific accounts in the ledger.