In the Case of an External Cost

question 89

Multiple Choice

In the case of an external cost:

• A) the agent responsible for the cost must pay for the cost.
• B) the government will always pay the cost.
• C) the agent responsible for the external cost will produce too much of the good or service involved.
• D) there is generally an offsetting social benefit.

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Definitions:

Rational Self-Interest

An economic theory that suggests individuals make decisions based on the best outcome for themselves, taking into account the costs and benefits of each option.

Values

Representations of the importance, worth, or usefulness of something, often guiding decision-making and behavior.

Reservation Price

The highest amount a customer is prepared to spend on a product or service.

English Auction

A type of auction in which the price ascends with each subsequent bid, and the highest bidder wins.