-The Figure Above Shows the Costs Associated with Producing Paper

question 370

Multiple Choice

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. If paper production is 4 tons per week, the outcome is

• A) efficient because marginal benefit equals marginal private cost.
• B) efficient because private and external costs are accounted for.
• C) inefficient because only marginal external benefits are accounted for.
• D) inefficient because marginal social cost exceeds marginal social benefit.

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Definitions:

Sinking Fund

A reserve fund established by setting aside revenue over a period of time to fund a future capital expense or repayment of a long-term debt.

New Roof

The process or cost associated with replacing an old roof with a new one, either for repair or upgrade purposes.

Compounded Annually

Interest calculated on the initial principal and the interest accumulated over the previous periods once every year.

Present Value

The amount needed to invest today to reach a stated future goal, given a certain rate of return.