Suppose a Product Produces Substantial Spillover Costs

question 190

Multiple Choice

Suppose a product produces substantial spillover costs. If the government adopts a policy that forces producers to bear those costs:

• A)​the equilibrium quantity of the product exchanged will fall.
• B)​the initial misallocation of resources will be corrected.
• C)​the equilibrium price of the product will rise.
• D)​all of the above will be true.

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Definitions:

Cash Equivalents

Short-term, highly liquid investments that are easily convertible to known amounts of cash, typically with original maturities of three months or less.