When an External Cost Exists in the Production of a Good

question 260

Multiple Choice

When an external cost exists in the production of a good, firms tend to

• A) under-produce the good since society pays these costs.
• B) over-produce the good.
• C) keep production constant throughout the year.
• D) under-allocate resources to the production of the good.

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Definitions:

Successive Approximations

A technique in behavior modification that rewards behaviors that progressively get closer to the desired one.

Operant Conditioning

A learning process in which the consequences of an action determine the likelihood of that action being repeated.

Negative Reinforcer

A stimulus whose removal or avoidance after a behavior increases the likelihood of that behavior being repeated.

Anxiety

A feeling of worry, nervousness, or unease, typically about an imminent event or something with an uncertain outcome.