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:

Product Life Cycle

The stages that a product goes through from introduction to growth, maturity, and eventual decline as market conditions and consumer preferences evolve.

Demand Strategy

Approaches businesses use to increase demand for their products or services, often through marketing and innovation.

Unstable

Lacking consistency or regularity; prone to sudden change or unpredictability.

Supply Chain Strategy

The plan and execution of all processes involved in sourcing, procuring, converting, and all logistics management activities, aiming to maximize customer value and achieve a sustainable competitive advantage.