If Production of an Item Results in Negative External Costs

question 160

Multiple Choice

If production of an item results in negative external costs, then

• A) the market price is below the socially preferred price that reflects the external costs.
• B) the market price is above the socially preferred price that reflects the external costs.
• C) market forces will always correct the problem.
• D) the market quantity is too low from society's point of view.

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Definitions:

Undramatically

In a manner that lacks excitement, drama, or noticeable impact.

Belief Perseverance

The tendency to maintain one’s beliefs even in the face of evidence that contradicts them.

Framing Effect

A cognitive bias where people react differently based on how choices are presented to them, often affecting decision-making.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person's mind, influencing their perception of a topic's prevalence or importance.