If the Production of a Product or Service Involves External

question 129

Multiple Choice

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by

• A)providing a subsidy to correct for an overallocation of resources.
• B)providing a subsidy to correct for an underallocation of resources.
• C)imposing a corrective tax to correct for an overallocation of resources.
• D)imposing a corrective tax to correct for an underallocation of resources.

---

Definitions:

Balance Surplus

A situation in which income or receipts exceed expenditures or outlays, often referring to a country's trade or fiscal balance.

Balance Deficit

A situation in financial accounts, particularly in national accounts, where total outflows exceed total inflows.

Capital and Financial Account

A component of a nation's balance of payments that covers the transfer of capital and financial assets across international borders.

Balance Surplus

An economic situation where the income or supply exceeds the expenditure or demand, leading to a surplus.