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

question 17

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 amount producers of this product could reasonably afford to spend per unit produced in order to successfully insulate themselves from possible just and reasonable jury awards in lawsuits is

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

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