The Reason Externalities Distort the Allocation of Resources Is That

question 1

Multiple Choice

The reason externalities distort the allocation of resources is that

• A)too few goods are usually produced.
• B)firms often go out of business because of the externality.
• C)a firm's private costs do not reflect the social cost of production.
• D)regulating externalities uses scarce resources.

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Definitions:

Dominance

In genetics, the phenomenon where one allele masks the expression of another allele at the same locus.

Recessiveness

A term in genetics where a trait is not expressed in the presence of a dominant allele, requiring two copies of a recessive allele for expression.

Economies of Scope

Economies of scope describe cost advantages that enterprises obtain due to a broader scope of operations, where producing a wider variety of goods or services leads to lower average costs.

Economies of Scale

Reductions in the average cost of a product in the long run, resulting from increased production and operational efficiencies.