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

question 12

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. The competitive industry would produce the socially optimal quantity of this product if the expected per unit cost to producers of this product due to just and reasonable lawsuits were

• A)zero.
• B)greater than zero but less than the external cost.
• C)greater than the external cost.
• D)equal to the external cost.

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Definitions:

Hypotheses

Proposed explanations made on the basis of limited evidence as starting points for further investigation.

Possible Explanations

Various theories or reasons presented to understand or justify an occurrence, phenomenon, or decision.

Unrepresentative Data

Data that does not accurately reflect the characteristics or distribution of the whole population or phenomenon it is supposed to represent.

Acceptance

The act of receiving or consenting to something offered or proposed, often implying agreement or approval.