The Cost of Installing Improved Production Equipment and Production Processes

question 215

Multiple Choice

The cost of installing improved production equipment and production processes is a(n) ________ cost.

• A)external failure
• B)internal failure
• C)appraisal
• D)prevention

---

Definitions:

Negative Externality

An adverse effect on a third party not directly involved in an economic transaction, often leading to market failure if not properly addressed.

Marginal Social Cost

The additional cost to society as a whole of producing one more unit of a good or service, including both private and external costs.

Marginal Damage Cost

The additional cost associated with producing one more unit of a good or service, considering the negative externalities.

Efficient Amount

This refers to the quantity of a good or service that maximizes social welfare, where the marginal benefit to consumers equals the marginal cost of production.