Which of the Following Activities Represents an External Cost

question 100

Multiple Choice

Which of the following activities represents an external cost?

• A)The reduction in the incidence of chicken pox after children are inoculated against the disease
• B)The damage to a person's health from secondhand smoke
• C)The increase in local property values after a park is built in a city
• D)The price paid for the prime rib that is consumed at a local restaurant
• E)The monthly rent paid by a manufacturer on a factory building

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Definitions:

Supply Curve

A graphical representation used in economics to show the relationship between the price of a good or service and the quantity of it that producers are willing to supply.

Government's Revenue

The money received by a government from taxes and non-tax sources to enable it to undertake government expenditures.

Efficiency Loss

Refers to the loss of economic efficiency when the optimal allocation of resources is not achieved, often due to market failures or distortions.

Demand Curve

A chart that displays how the cost of a product affects the amount consumers want to buy, usually showing a decline from left to right.