If There Are External Costs in Production and Firms Do

question 146

Multiple Choice

If there are external costs in production and firms do not have to account for these costs, then firms will produce

• A) at the efficient level.
• B) an output level that is below the efficient level.
• C) an output level that is above the efficient level.
• D) an output level that is either above or below the efficient level.

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Definitions:

Capital

Assets used for the production of goods and services, such as buildings, machinery, and equipment.

Purchase Price

The amount of money that is paid to buy a good, service, or asset.

Rental Price

The cost associated with leasing or renting a property, such as a house, apartment, or commercial space.

Capital Stock

The total amount of physical goods or assets that a company or country uses in the production of goods and services.