Figure 5-2 Shows a Market with a Negative Externality

question 119

Multiple Choice

Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The marginal benefit of the last unit produced is represented by the price

• A)Pa.
• B)Pb.
• C)Pc.
• D)Pf.

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Definitions:

Implicit Costs

The opportunity costs that are not directly paid for in dollars but represent the loss of benefits from the next best alternative when resources are not used in their best alternative use.

Mental Accounting

A concept in behavioral economics where individuals categorize and treat money differently depending on its source, intended use, or other psychological factors.

Irrational Behavior

Actions or decisions that do not logically follow from a rational analysis of the situation.

Misperception

A misunderstanding or incorrect interpretation of a situation, often leading to erroneous decisions or beliefs.