When an External Cost Exists That Is NOT Taken into Account

question 223

Multiple Choice

When an external cost exists that is NOT taken into account in the production of a product,

• A) the level of output is too low, and the supply curve should shift to the right to account for the externality.
• B) the level of output is optimal, and there should be no change in the supply curve.
• C) the price of the product is too high, and production should be expanded to lower the price.
• D) the level of output is too high, and the supply curve should shift to the left to account for the externality.

---

Definitions:

Shopping Products

Goods that consumers spend a considerable amount of time and effort in selecting and purchasing, such as clothes, electronics, and furniture.

Unsought Products

Items that the consumer does not know about or knows about but does not initially want.

Impulse Buys

Purchases made spontaneously without prior planning, often triggered by emotions or the strategic placement of products.

Product Life Cycle

The progression of a product through stages including introduction, growth, maturity, and decline.