A Good That Has Social Costs That Are Equal to Private

question 149

Multiple Choice

A good that has social costs that are equal to private costs has a price that is

• A) too high.
• B) too low.
• C) just right.
• D) equal to marginal cost.

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Definitions:

Total Variable Cost

The sum of all costs that vary with the level of output produced by a company.

Fixed Costs

Costs that do not vary with the level of production or sales.

Short Run

A period in which at least one input, such as plant size or the number of firms in the market, is fixed and cannot be changed.

Fixed Cost

Any cost that does not depend on the firms’ level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run.