-The Expected Damage to Innocent Third Parties Per Unit of the Good

question 11

Multiple Choice

-The expected damage to innocent third parties per unit of the good produced is shown as the "external cost" in Figure 27.1. An unregulated competitive market for the product produces a quantity of Q* units, which sell for a price of P* per unit. If the expected cost to producers of this product due to unreasonable jury awards in frivolous lawsuits were greater than the external cost per unit produced, the quantity of the good produced by this competitive industry would be

• A)greater Q* units.
• B)greater than the socially optimal quantity but less than Q* units.
• C)equal to the socially optimal quantity.
• D)less than the socially optimal quantity.

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Definitions:

Assessed Value

The dollar value assigned to a property for purposes of taxation by the government.

PST

Provincial Sales Tax, which is a tax levied by individual provinces in Canada.

Term Test

An examination conducted during the academic term to assess a student's understanding of the course material covered up to that point.

Average Score

The sum of all individual scores divided by the number of scores, used to find the typical or middle value in a set of numbers.