Which of the Following Statements About Private and Social Costs

question 16

Multiple Choice

Which of the following statements about private and social costs is TRUE?

• A) Social costs include externalities.
• B) Private cost do not include externalities.
• C) Social costs are never smaller than private costs.
• D) All of the above.

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Definitions:

Informed Markets

Markets where all participants have access to all relevant information, leading to more efficient price determination.

Residual Claim

Stockholders’ claim to income and assets is the residual after all other claims are satisfied.

Common Shareholders

Individuals or entities that own common shares in a corporation, granting them voting rights and a claim on a portion of the company’s profits through dividends.

Preemptive Rights

The right of existing shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issue of common stock.