The Optimal Quantity of a Negative Externality Is Zero If

question 153

Multiple Choice

The optimal quantity of a negative externality is zero if:

• A)it imposes a high enough cost on society.
• B)it is costly for people to negotiate with each other.
• C)the majority of voters decide to eliminate the externality.
• D)the marginal cost of reducing the externality is zero.

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Definitions:

Inventory-Related Cost

Expenses associated with ordering, storing, handling, and managing inventory, including costs related to warehousing, spoilage, and obsolescence.

Fixed-Quantity System

An ordering system with the same order amount each time.

Fixed-Period System

A system in which inventory orders are made at regular time intervals.

Economic Batches

The optimal production quantity that minimizes the total cost, including setup costs and holding costs, ensuring cost-efficient production runs.