FIGURE 16-1 -Refer to Figure 16-1.Suppose the Perfectly Competitive Market with No

question 26

Multiple Choice

FIGURE 16-1
-Refer to Figure 16-1.Suppose the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC₀ and MB₀,respectively,then there exists

• A)a negative external benefit.
• B)a negative external cost.
• C)a positive external benefit.
• D)a positive external cost.
• E)no externality whatsoever.

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Definitions:

Wage Increase

An upward adjustment in the pay that employees receive for their work.

Deferred Annuity

An insurance contract designed to generate regular payments starting at a future date, often used as a retirement investment.

Quarterly Payment

Regular payments made every three months on a loan or investment.

Compounded Semi-annually

The process of adding interest to the principal sum of a loan or deposit, where the interest is added twice a year.