If Negative Externalities Are Generated in the Production of a Good

question 80

Multiple Choice

If negative externalities are generated in the production of a good, then society will:

• A)produce too much of the good because the private cost of production is greater than the social cost of production.
• B)produce too little of the good because the private cost of production is less than the social cost of production.
• C)produce too much of the good because the private cost of production is less than the social cost of production.
• D)produce too little of the good because the private cost of production is greater than the social cost of production.
• E)produce too little of the good because the private cost of production is less than the private benefit from the good.

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Definitions:

Bullwhip Effect

A situation in supply chain management where slight shifts in demand from consumers cause increasingly amplified shifts in demand at the levels of manufacturers, distributors, and wholesalers.

Primary Causes

Fundamental reasons or root causes that directly lead to an event, situation, or outcome, distinct from secondary or tertiary factors.

Remedy

Refers to a treatment, solution, or means of correcting or improving a problem, situation, or condition.

Bullwhip Measure

A metric used to quantify the increase in fluctuation at higher tiers of a supply chain caused by small changes in demand at the consumer end.