Suppose That a Steel Factory Emits a Certain Amount of Air

question 299

Multiple Choice

Suppose that a steel factory emits a certain amount of air pollution, which constitutes a negative externality. If the market does not internalize the externality,

• A)the supply curve would adequately reflect the marginal social cost of production.
• B)consumers will be required to pay a higher price for steel than they would have if the externality were internalized.
• C)the market equilibrium quantity will not be the socially optimal quantity.
• D)producers will produce less steel than they otherwise would if the externality were internalized.

---

Definitions:

Income Summary

An account to which all revenues and expenses are transferred, to summarize the income or loss for a reporting period before transferring the balance to retained earnings or capital accounts.

Unearned Revenue

Unearned revenue represents money received by an entity for a service or product that has yet to be provided or delivered. It is recorded as a liability on the balance sheet.

Capital Account

An account showing the net worth of a business at a specific point in time, reflecting owners' equity and investments.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments, used to prepare financial statements.