Why Do Negative Externalities Like Pollution Result in Inefficiency

question 100

Multiple Choice

Why do negative externalities like pollution result in inefficiency?

• A) Because producers artificially restrict their supply.
• B) Because producers ignore the external costs they impose on third-parties.
• C) Because producers manufacture more goods than people can afford to buy.
• D) Because producers will receive an unequal distribution of profits.

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Definitions:

Work in Process

Inventory that includes materials that have been partially processed but are not yet finished goods.

Standard Costs

Estimated or predetermined costs of manufacturing, selling, or doing something, which are used for budgetary and costing purposes.

Cost System

A method used by firms to track, record, and analyze costs associated with their operations, typically to improve efficiency or profitability.

Kilos

A metric unit of mass equal to one thousand grams or approximately 2.20462 pounds.