Once a Firm Is Made to Internalize a Negative Externality

question 199

Multiple Choice

Once a firm is made to internalize a negative externality, the price will

• A) increase and output will decrease.
• B) increase and output will increase.
• C) decrease and output will decrease.
• D) decrease and output will increase.

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Definitions:

Written Agreement

A formal contract that outlines the terms and conditions of a particular arrangement, documented in writing.

Chain-style Business

A business model where multiple outlets of the same company offer the same product or service, typically under the same brand.

Franchisor

A business entity that grants the right to an individual or group to carry out commercial activities using its trademark and business model in exchange for a fee or royalty.

Franchisee

The seller of goods or services under a trade name or trademark in a franchise.