The Presence of Negative Externalities in the Production of a Good

question 1

Multiple Choice

The presence of negative externalities in the production of a good leads to a misallocation of societal resources because:

• A)people can enjoy the benefits of the good without paying for it, thereby reducing the profit margin of producers.
• B)too little of the good than is ideal for society is produced.
• C)there are some costs associated with production that the producer fails to take into consideration.
• D)the government always intervenes in markets when negative externalities are present, resulting in inefficiency.
• E)too low a price is charged by the producers of the good, thereby reducing the profit margin of the producers.

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Definitions:

Physiological

Relating to the functions and processes of living organisms and their parts, including physical and chemical processes.

Self-Actualization

The achievement or actualization of personal talents and potential, often regarded as a universal motivation or necessity within every individual.

Maslow

Refers to Abraham Maslow, a psychologist known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs.

Physiological Need

Basic physical requirements necessary for human survival, such as food, water, and sleep, which must be met to ensure health and well-being.