If the Social Cost of Producing a Good or Service

question 76

Multiple Choice

If the social cost of producing a good or service exceeds the private cost

• A)a positive externality exists.
• B)the sum of consumer surplus and producer surplus is maximized.
• C)the market achieves economic efficiency.
• D)a negative externality exists.

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Definitions:

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Markdowns

Reductions in the retail prices of goods, typically to stimulate sales or clear inventory.

Markup

The sum included in the goods' purchase price to account for operational costs and earnings.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit divided by the cost of the investment.