When a Negative Externality Exists, the Private Market Produces

question 255

Multiple Choice

When a negative externality exists, the private market produces

• A)more than the economically efficient output level.
• B)less than the economically efficient output level.
• C)products at a low opportunity cost.
• D)products at a high opportunity cost.

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Definitions:

Dollar Value

The worth of something in terms of the amount of currency it can buy or how much currency is required to buy it.

Loanable Funds Market

A theoretical market where borrowers and lenders interact to determine the interest rate and the quantity of loanable funds exchanged.

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation, representing the true cost of borrowing.

National Saving

The sum of savings made by both individuals and the government within a country, crucial for financing national investments.