An External Benefit Implies That Private Markets Will Provide ________

question 44

Multiple Choice

An external benefit implies that private markets will provide ________ than the socially optimal quantity, and an external cost implies that private markets will provide ________ than the socially optimal quantity.

• A)more; more
• B)less; less
• C)more; less
• D)less; more

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Definitions:

Expansion

The phase of the business cycle where economic activities and production levels increase, leading to growth in GDP and employment.

Indexed Equity Mutual Fund

An equity mutual fund that holds a portfolio of stocks that matches their share (or weight) in a broad stock market index such as the S&P 500. The overhead of these funds is usually quite low because their expenses on stock trading and research are low.

Managed Equity Fund

An investment fund in which a manager or management team makes decisions about how to allocate assets in a portfolio of equities.

Operating Costs

Refers to the day-to-day expenses involved in running a business, such as rent, utilities, and payroll.