When a Producer Does Not Internalize the Negative Externality Associated

question 6

Multiple Choice

When a producer does not internalize the negative externality associated with the production of a good,then:

• A)the socially optimal quantity of output must be larger than the market output.
• B)the socially optimal quantity of output must be less than the market output.
• C)the socially optimal quantity of output must be equal to the market output.
• D)the socially optimal quantity of output can be either larger or smaller than the market output.

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Definitions:

Prices of Inputs

This term describes the cost of resources used in the production of goods and services, such as raw materials, labor, and machinery.

Hourly Price

The cost or price of something for each hour it is used, produced, or provided.

Production Technology

Refers to the methods, equipment, and processes used to produce goods and services.

Capital Intensive

An industry or business that requires large amounts of money and resources (such as machinery or equipment) to produce goods or services.